William James Mudie Larnach arrived in Dunedin in 1867, a banker and entrepreneur riding the prosperity that the Otago gold rush had delivered. He purchased land on the peninsula ridge in 1870 and hired R.A. Lawson, Dunedin's most prominent architect, to design a mansion in the Gothic Revival style. Workers jammed pegs into layers of volcanic rock and split the surface with cold salt water to level the site. Construction began in 1871, and the resulting complex eventually contained 43 rooms, required 46 servants, and sprawled across 35 acres of grounds. A separate home farm of 300 acres supported the estate with its own cow byre for 300 head, stables, and workers' quarters. When his eldest daughter Kate turned twenty-one, Larnach added a 3,000-square-foot ballroom as her birthday present.

The castle's grandeur masked a life shadowed by loss. Larnach's first wife, Eliza, died of a stroke in 1880 at the age of 38. He married her half-sister Mary in 1882, only to lose her to blood poisoning in 1887, also at 38. His beloved daughter Kate, for whom he had built the ballroom, died of typhoid in 1891. A third marriage brought further complications, and Larnach's finances crumbled under the weight of maintaining a castle on the edge of the world. On a day in October 1898, in a committee room of New Zealand's Parliament building in Wellington, William Larnach shot himself. He was 65 years old. The castle and its contents passed to creditors, and the Larnach family's connection to the place ended with a forced sale in 1906.

What followed was the slow indignity that befalls grand buildings when no one claims responsibility for them. The castle served as a mental asylum annex. It housed soldiers during wartime. It functioned as a tourist destination, a cabaret venue, and a farmer's shed. Roofs leaked. Ceilings that had taken years to carve warped and deteriorated. Original furniture scattered to auction houses and private collections across New Zealand. By the mid-twentieth century, the building that Larnach had filled with Venetian glass and hand-carved woodwork stood open to the elements and the indifference of successive owners.

In 1967, Barry and Margaret Barker purchased what remained. The restoration has been a family project spanning generations, funded not by government grants but by tourism revenue. The Barkers tracked down and retrieved original furniture piece by piece. They rebuilt what weather had ruined. In 2015 alone, the music room required a $100,000 refurbishment. The gardens, which were not part of Larnach's original estate, have grown into something extraordinary under the family's care. They are one of only five in New Zealand to hold the designation "Garden of International Significance" from the New Zealand Gardens Trust, and were the first in the South Island to receive that honor. Heritage New Zealand designated the castle a national landmark in 2018. Today, around 120,000 visitors arrive each year. In 2013, a direct descendant of William Larnach was proposed to by her partner inside the castle, closing a circle that began with ambition and ended, for one afternoon at least, with something gentler.

The castle's reputation for paranormal activity has drawn investigators from around the world. Television crews from New Zealand's Ghost Hunt and the American series Ghost Hunters International have set up cameras in the ballroom and corridors, and tourists occasionally report encounters with what they cannot explain. In 1994, a play called Castle of Lies, dramatizing the Larnach family tragedies, was performed by Dunedin's Fortune Theatre before 100 invited guests in the very ballroom where Kate once danced. More recently, the castle and surrounding Camp Estate appeared as the royal residence of fictional Lavania in the 2022 Netflix film The Royal Treatment. Whether the ghosts are real matters less than what they represent: the sense that a place this steeped in human drama cannot quite let go of the people who built it.