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The village of Netherne-on-the-Hill is situated on a chalk plateau above the A23 Brighton Road through Hooley. The site was originally a farm, which was purchased in 1898 by Surrey Council for the purpose of establishing a mental hospital, to complement its existing facility at Brookwood near Woking. Development took place over the period 1907-9, with the buildings being designed by the architect G T Hine, who was responsible for a number of such facilities around the country. The Surrey County Lunatic Asylum, as it was known, was renamed Netherne Mental Hospital in the 1920s. Further buildings were added in the 1930s with additional convalescent wards and staff accommodation added to the north of the main site and a voluntary admissions facility, known as Fairdene Hospital, to the south.

At its peak, the hospital housed almost 2,000 patients, but changes in attitudes and treatment led to reductions over the second half of the 20th Century, culminating in its eventual closure in 1994.

The site was purchased by the development company Gleesons who have converted the site into the current village, through a combination of refurbishment, rebuild and new build.