During World War II, Cockatoo Island was the main ship repair facility in the southwest Pacific. 250 ships were converted or repaired at the island, including the Queen Mary and Queen Elizabeth. In August 1943, the cruiser HMAS Hobart limped into Sydney Harbour and Cockatoo Island for repairs and modernisation after suffering torpedo damage in the New Hebrides. In 1945 HMAS Australia, a veteran of the Battle of the Coral Sea, also steamed home for repairs after suffering kamikaze attacks in the Philippines.

After the war, ships were converted back to commercial service. In the 1960s Cockatoo Island constructed Empress of Australia, the largest roll-on roll-off cargo passenger ship in the world. The mid 1960s also saw international competition and changes to the tendering process affect production. This affected facility maintenance and staff numbers, and by the 1970s shipbuilding on the island was in a state of serious decline.

The last ship to be constructed on the island was HMAS Success, the largest naval vessel built in Australia. In its lifetime the yard had over 12,000 dockings, constructed hundreds of vessels and repaired thousands, as well as providing the livelihood and training for countless workers.