The hospital was founded in 1934 by the Franciscan Sisters of Allegany, based in upstate New York, to serve the working-class neighborhood, composed largely of Italian and Irish immigrants to the United States. It provided basic nursing care; to help with this, a school of nursing was founded.
In an effort to respond better to the changing needs of the neighborhood, the hospital expanded from basic medical care to provide a wide range of services, especially in the field of social service. One example was the founding in 1977 of a small shelter solely for homeless women, called The Dwelling Place. It was established by a small group of Franciscan Sisters who took over an abandoned brownstone near the hospital in order to house these women, who often refused to stay in public shelters because they did not feel safe in them.
When AIDS began to emerge in the United States during the early 1980s, New York was one of the hardest-hit cities but had no specialized facility to address the patients' multiple needs. Despite his disagreements otherwise with the gay community, Archbishop John J. O'Connor approved the opening of such a facility at St. Clare's. It was the first hospital in New York to care for HIV/AIDS patients.
In 2003 the Franciscan Sisters came to the conclusion that they could no longer operate the hospital, due as much to the diminishing membership of the Congregation as to finances. Arrangements were made to transfer the hospital to the auspices of Saint Vincent's Catholic Medical Center, the oldest Catholic hospital in the city, located in the Greenwich Village neighborhood. The transfer was accomplished and the hospital was renamed St. Vincent's Midtown Hospital.
In 2005 the Governor of New York, George Pataki, established the Commission on Health Care Facilities in the 21st Century. Its goal was to evaluate the services and capacities of the hospitals in the state, in order to find ways of streamlining medical care and avoiding the duplication of services. Chaired by Stephen Berger, it was commonly referred to as the "Berger Commission".
The Commission determined that St. Vincent's Midtown Hospital was superfluous to the needs of the local community and ordered its closure. This took place on 31 August 2007.