Capel Street was named after Arthur Capell, 1st Earl of Essex who served as Lord Lieutenant of Ireland between 1672–1677; The nearby Essex Bridge was also named after him (now called Grattan Bridge).

The street and bridge were built by Sir Humphrey Jervis who developed much of north inner city Dublin and made it into a fashionable part of town. Sir Jervis had purchased 20 acres of land around St. Mary’s Abbey from Richard Power, 1st Earl of Tyrone for £3,000 in 1674. The overall development consisted of a triangular grid from Capel Street and included Jervis Street, Mary Street, Great Britain Street and Great Strand Street.

Capel Street became one of the primary commercial thoroughfares for Dublin, and housed mansions and even a Royal mint. Today one of the oldest tool shops on the street is McQuillans Hardware, built in 1867.