The construction of Al Bastakiya dates back to the 1890s. In its prime, the locality was capable of supporting 60 housing units, most of which were separated by narrow, winding lanes. Traditionally a stronghold of rich residents, the demographic of the locality changed with the discovery of oil, which resulted in many rich families relocating to other parts of the city. As a result, expatriate families moved into Al Bastakiya and the Al Souk Al Kabir area (referred to as Meena bazaar by immigrant residents).
In the 1970s about a half of Bastakiya was destroyed to make way for the development of a new office complex for the emirate's Ruler. The remaining area fell into some disrepair and, apart from the Majlis Gallery, an art and crafts centre, the wind tower houses became largely used as warehouses or for accommodation of expatriate labourers. A British architect, Rayner Otter, took up residence in one house and carried out extensive renovations within. In 1989 the Dubai Municipality scheduled the remaining area of Bastakiya to be demolished. Rayner Otter started a campaign to preserve the area and wrote to Britain's Prince Charles who was due to visit the emirate that year. When he arrived in Dubai, Prince Charles, who is known for his views on architecture and his love of historic buildings, asked to visit Bastakiya. Here he met Otter and explored the whole area. It is understood that during his visit Charles suggested to his hosts that Bastakiya should be preserved. Shortly after his departure the decision to demolish Bastakiya was reversed.
A project aimed at restoring the locality's old buildings and lanes was initiated by Dubai Municipality in 2005.
What makes Al Bastakiya unique is its architecture. The wind tower, called barjeel, is in every house of Al Bastakiya. The number of barjeels a house has indicates the wealth of the owner family. Moreover, the doors of the houses are related to cultural behaviors. For example the main door of the house is large whereas the inner door is short, and this is because when men entering the house should bend down not facing women directly.