Karl Hoblitzelle's Interstate Theater Circuit built the Lakewood Theater in 1938 on land leased from Dines and Kraft, the developers of the Lakewood Shopping Center in East Dallas. It opened on October 27, 1938, with Love Finds Andy Hardy, starring Mickey Rooney, Judy Garland and Lana Turner. H. F. Pettigrew of Pettigrew and Worley designed the Art Deco building, whose 100-foot red-and-green neon tower spelling "Lakewood" came from the Dallas sign maker Texlite. Inside, decorator Eugene Gilboe and "Dallas Nine" painter Perry Nichols filled the lobby with murals of Mickey Mouse, Donald Duck, Goofy, cowboys and dancers, and French sculptor Jose Martin made the two female figures flanking the proscenium. The 1,000-seat house was one of Dallas's first air-conditioned theaters and offered in-seat audio jacks for hearing-impaired patrons.
As television and later multiplexes cut into attendance, the Lakewood was altered in 1952, 1953 and 1969. In 1973 Interstate sold the lease to Sam Chernoff, who ran "dollar movies," and the theater closed in October 1983. The next month B. B. Barr bought the building from Dines and Kraft and restored it, extending the stage for live shows and installing a 1927 pipe organ from the Old Mill Theatre on Elm Street in 1985. Attendance fell again, and the theater closed in 1993.
Mark Miranda and Jim Christon bought the theater in 1996, and Keith McKeague leased it that year for movies, special events and parties. The owners of record in 2015 had bought the theater and part of the shopping strip in 2007. In 2013 Netflix released Iliza Shlesinger's first stand-up special, War Paint, recorded at the Lakewood.
The theater closed on January 2, 2015. That fall, with the building empty and asbestos removal under way, a landmark nomination prepared for Alston Architects and drawing on work by Preservation Dallas went to the Dallas Landmark Commission. It called the Lakewood one of the most fully intact Interstate theaters left in Texas, with its neon pylons and murals still in place. The city then designated the building Historic Overlay District No. 148 by Ordinance 30192.