Gray arrived in Clayoquot Sound aboard the Columbia Rediviva in late August 1791, following his fellow trader John Kendrick, who had preceded him and acquired land from Wickaninnish, chief of the Tla-o-qui-aht people, in exchange for firearms. On September 19, Gray located a narrow cove on the eastern side of Meares Island, sheltered from the open Pacific by the island's bulk and naturally defensible against attack. Construction began two days later. By September 30, the main building stood: a two-storey structure 36 feet long by 18 feet wide, its Boston bricks forming a large fireplace and forge. Two cannons were mounted on the building, musket loopholes cut into the walls. A blacksmith shop, two sawpits, cabins, and a boatbuilding shed completed the complex. When the Americans were finished fortifying, four cannons and 40 muskets stood ready ashore.

The real purpose of the fort was not defense but construction. Gray had brought framing supplies in the Columbia's hold, and on October 3, 1791, his crew laid the keel for a 45-ton sloop on the beach below the fort. Over the following months, they felled tall trees from the surrounding forest, floated them to the site, and shaped them into a mast and planks. A whaleboat was simultaneously built within the fort's walls. On March 23, 1792, the sloop was launched into the waters of what Gray had named Adventure Cove. It was the first vessel built by Americans in the Pacific Northwest, assembled from a combination of Boston hardware and Vancouver Island timber at a latitude that no American settlement had yet reached.

Relations between the Americans and the Tla-o-qui-aht were, for the most part, cordial. On Christmas Day 1791, Chief Wickaninnish and several other chiefs dined aboard the Columbia. On New Year's Day, the Americans were entertained onshore by Wickaninnish in return. The ship's log noted these diplomatic meals with the terse formality of maritime record-keeping, though it also recorded that Gray had at times let his passions go too far, a cryptic observation whose meaning the journal does not elaborate. The Opitsaht village, the Tla-o-qui-aht's principal settlement, lay nearby on Meares Island, and the two communities coexisted through the winter in what appears to have been a pragmatic, if occasionally strained, relationship.

In March 1792, Gray sailed away with both the Columbia and his new sloop, stripping the fort of anything useful before departing. Fort Defiance had served its purpose. The cove, which Gray called Adventure Cove and which lies in what was then known as Disappointment Inlet (now Lemmens Inlet), returned to the forest. Researchers identified the site in 1966, and British Columbia officially adopted the name Fort Defiance in 1975, designating the small island in the cove as Columbia Islet. Today the 135-acre archaeological site is protected, its remains a testament to the brief, intense season when an American crew wintered among the Nuu-chah-nulth, built a ship from scratch, and sailed away into history.