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In 1889, when Chicago annexed the Village of Hyde Park, it included an area with a city dump, swamps, and "Mud Lake," a popular spot for fishing and hunting. The mosquito-infested swampland remained largely unsettled until after the installation of a sewage system in 1900. At first called Pierce's Park, the area became known as Pennytown for a general store owner named Penny who sold homemade popcorn balls. In 1910, Avalon Park Community Church members successfully led an effort to rename the community Avalon Park. The church, community, and a local street pay homage to the English Isle of Avalon, believed to be the burial place of legendary King Arthur.

In 1923, Avalon Park civic groups began asking for the creation of a park in their neighborhood. Due to funding limitations, the South Park Commission was slow to respond. The commissioners agreed to begin identifying potential sites in 1927. Finally, in 1930 the South Park Commission acquired the land for Avalon Park. The following year, in-house landscape architect Robert Moore created a plan for Avalon Park that was inspired by the earlier South Park designs of the nationally renowned Olmsted Brothers firm. Due to the Great Depression, however, the South Park Commission was unable to move forward with improvements. In 1934, the city's 22 independent park commissions were consolidated into the ¿ì²¥ÊÓƵ, and federal relief funding soon allowed work to begin on Avalon Park. Only partially realizing Moore's plan, the Park District installed playfields, a running track, tennis and horseshoe courts, and a combination shelter and comfort station. After needing a more substantial fieldhouse for years, the Park District constructed an attractive modern brick building in 1958.