For over 200 years the Smalls Lighthouse has been acting as a guide and hazard warning to passing ships. John Phillips, a Welshman, first conceived the idea of setting a lighthouse on the Smalls, one of two tiny clusters of rocks lying close together in the Irish Sea, 33.8 kn (21 miles) off St. David's Head in Wales, the highest peak of which projects only 3.5 m (11.5 ft) above the highest tides. He advertised for designs and chose one submitted by Henry Whiteside, a musical instrument maker from Liverpool.

Whiteside had designed an octagonal house or hut of timber, 4.5 m (14.5 ft) in diameter, perched on nine legs or pillars, five of wood and three of cast iron, spaced around central timber post. During the Winter 1775-1776, Whiteside erected the whole structure temporarily at Solva, a small Welsh Haven over 40.2 km (25 miles) from the Smalls. In the Spring of 1776, and thanks to the preliminary assembly during which the parts were carefully fitted together, work proceeded so well that by September the oil lamps were lit.

Drastic repairs and alterations became necessary after the storms of December 1777, but Phillips had no funds to carry them out. He discharged the keepers and extinguished the light and made over his interest to a Committee of Liverpool Traders. They induced Trinity House to obtain an Act of Parliament in 1778 which authorised the Brethren to repair, rebuild and maintain the lighthouse and to collect and levy reasonable dues. In view of Phillips' services and his financial losses, they granted him a lease on 3rd June, 1778 for 99 years at a rent of £5.

Authoritative accounts of this lighthouse bear witness to a tragic episode which appears to have occurred before 1801. Apparently one of the two keepers on the station died and the survivor, fearing that he might be suspected of murder if he committed the body to the deep, put it into a box which he made from the interior woodwork of the house and lashed it to the lantern rail. Passing ships noted this strange object but raised no alarm before the usual relief boat arrived to succour the unhappy survivor. After this episode three keepers were appointed to the lighthouse.

Although the lighthouse was described in 1801 as a "raft of timber rudely put together" it survived for 80 years. Whiteside's design of raising a super-structure on piles so that the sea could pass through them with "but little obstruction" has been adopted since for hundreds of sea structures.

The present lighthouse was built under the supervision of Trinity House Chief Engineer, James Douglass. Its design was based on Smeaton's Eddystone tower and it took just two years to build being completed in 1861. In 1978 a helideck was erected above the lantern and the lighthouse was automated in 1987. In June 1997 the red and white stripes that had distinguished the tower were no longer considered necessary for navigation and the tower was grit blasted back to natural granite.