Richard D'Oyly Carte was the impresario who had introduced W. S. Gilbert to Arthur Sullivan, and he had a problem. Their comic operas were filling the Opera Comique, but the building was too small and too tired for what the partnership was about to become. He bought the old Savoy site in 1880, a steeply sloping plot that ran from the Strand down to the Thames Embankment, and commissioned the architect C. J. Phipps to design a new theatre specifically for the Gilbert and Sullivan repertoire. Carte considered calling it the Beaufort Theatre, but in a letter to The Daily Telegraph in 1881 he announced that on the Savoy Manor there had formerly been a theatre, and he had used the ancient name as an appropriate title for the present one. Collinson and Locke decorated the interior in the manner of the Italian Renaissance: white, pale yellow, and gold, with a gold satin curtain instead of the usual painted act-drop, red boxes, and dark blue seats.

Carte explained the electric lighting in unsentimental terms: the greatest drawbacks to the enjoyment of theatrical performances were the foul air and heat that pervaded all theatres. Each gas burner consumed as much oxygen as several people, and produced great heat besides. Incandescent lamps consumed no oxygen and produced no perceptible heat. The Times described the new lighting as visually superior to gaslight. Carte and his manager George Edwardes, later famous for the Gaiety Theatre, also introduced a string of small innovations that defined the modern theatre experience: numbered seating so you knew where you were sitting before you arrived, free programme booklets, decent whisky at the bars, the queue system for the pit and gallery imported from American practice, and a strict policy of no tipping for cloakroom or any other service. Daily expenses ran about half the possible takings from ticket sales. The theatre opened on 10 October 1881 with Gilbert and Sullivan's Patience.

Across the next two decades the Savoy was home to the great Gilbert and Sullivan run. The Mikado, Iolanthe, The Yeomen of the Guard, Princess Ida, and Ruddigore all premiered or moved here. Sullivan died in 1900. Richard D'Oyly Carte died in 1901. The theatre closed briefly in 1903 and reopened under new management. Carte's son Rupert took over in 1915, and the Christmas pantomime tradition continued until the outbreak of the Second World War. On 3 June 1929, Rupert closed the building and had the interior completely rebuilt to designs by Frank A. Tugwell, with elaborate decor by Basil Ionides who said he took the colour scheme from a bed of zinnias in Hyde Park. The ceiling was painted to resemble an April sky. The walls glowed translucent gold on silver. Stalls were upholstered in shifting tones. Lady Gilbert, the librettist's widow, sat in the only box at the reopening.

Coward's Blithe Spirit premiered in 1941. Relative Values ran 477 performances in 1951. The D'Oyly Carte Opera Company finally closed in 1982. Three years later Dame Bridget, Rupert's daughter and the last of the line, died childless. In February 1990, during a renovation, fire gutted the building down to the stage and backstage areas. A proposal to build a new theatre in late twentieth-century style was overruled by the Savoy's insurers and by English Heritage. It was decided to restore the building as faithfully as possible to the 1929 designs. Tugwell's and Ionides's working drawings had been preserved. Sir William Whitfield led the restoration. The theatre reopened on 19 July 1993 with a royal gala that included a specially commissioned ballet, Savoy Suite, by Wayne Sleep to a score arranged by Carl Davis from Sullivan's music. The reopened theatre hosted the World Chess Championship the same year, won by Garry Kasparov. An extra storey was added above the stage, including a swimming pool.

In December 2013, the Ambassador Theatre Group acquired sole ownership. The Savoy has since presented Dirty Rotten Scoundrels, Gypsy, Funny Girl, Dreamgirls, Dolly Parton's 9 to 5: The Musical, Pretty Woman: The Musical, and Sunset Boulevard starring Nicole Scherzinger. Sarah Jessica Parker and Matthew Broderick brought Plaza Suite from Broadway in 2024. Mean Girls opened that June and ran a year. Paddington: The Musical premiered on 1 November 2025 with songs by Tom Fletcher of McFly. The 1,158-seat auditorium, Grade II* listed, still glows in the colours Basil Ionides borrowed from Hyde Park zinnias. The lightbulbs no longer surprise anyone. The technology that Richard D'Oyly Carte broke onstage to prove safe is now so basic to a theatre's operation that no one notices when it works. They notice when it does not.