In June 1927, W.T. Carter, Jr. opened an airfield named after himself through his company, Houston Airport Corporation. Ten years later the City of Houston, using federal Public Works Administration funds, purchased W.T. Carter Field and renamed it Houston Municipal Airport.
After setting a new speed record by flying around the world in 91 hours in July 1938, Howard Hughes visited Houston to celebrate. The city announced the renaming of Houston Municipal Airport to Howard Hughes Municipal Airport. A few months later, city leaders learned the airport no longer qualified for Federal grant money as long as it was named after a living person. The name quickly returned to Houston Municipal Airport.
The 1940 Air Terminal opened in September. The terminal served as the administration building for the airport and supported airlines and traffic control operations. The city added upgrades throughout the airport including paved runways, hangars, and a runway lighting system during World War II. An international wing was added in 1949.
From 1954 to 1957, the City of Houston expanded the existing terminal, added a new modern terminal, and remodeled the existing runway system to accommodate new international destinations with service to Central America and Europe. With these alterations, the airport's name changed to Houston International Airport.
Houston International Airport was renamed in 1967 the William P. Hobby Airport after the 27th Governor of Texas. The name change was meant to correspond with the opening of Houston Intercontinental Airport but was two years early. The two terminals at Hobby accommodated more than 2 million passengers annually during the airport’s boom, but passenger demands soon outgrew the parking and lobby space. To meet the growing demand, the city opened Houston Intercontinental Airport north of the city in 1969. As a result, Hobby downsized its commercial traffic to become a General Aviation Airport serving mainly private and corporate aircraft. Two years later, as the new airport became congested, commercial flights resumed at Hobby.
In September 1978, the last tenants in the 1940 Air Terminal vacated the building. Unable to find new tenants for the 1940 Air Terminal, a debate ensued concerning the building's demolition. However, the building remained standing. Restoration of the terminal took place every ten years until 2004 when the Houston Aeronautical Heritage Society opened the 1940 Air Terminal Museum to the public in the terminal's north wing.
In 2008, the Houston Airport System opened a new Hobby Airport concourse and put into service a massive and modern redesign of the 1954 Houston International Terminal.
In April 2012, Southwest Airlines submitted an official proposal for international service through Hobby Airport to Mayor Annise Parker and the city council that gained acceptance the next month. In addition to the investment in a new international terminal, Southwest Airlines made a long-term commitment to Houston with a 25-year use and lease agreement at Hobby Airport. They broke ground on the international terminal in September 2013.