In 1892, the Police station moved from Moyse's Hall to new headquarters in St John's Street, and the idea of converting Moyse's Hall into a museum was first mooted. It was not immediately accepted, however. In the intervening period, part of the building was used by the Great Eastern Railway Company as a parcels and enquiry office. In 1894 the Guildhall Feoffees transferred both Moyse's Hall and the Guildhall to the Borough Council. The Borough Council proposed to turn Moyse's Hall into a fire station. Although this proposal was greeted by public protest, there is some evidence that it had already been used for storing fire-fighting equipment. An old photograph shows a row of hoses and other equipment probably used for fire-fighting, and a record of 1779 states that the Guildhall Feoffees gave permission 'for the making of a proper place for keeping one of the fire engines in some commodious part of the premises under the Bridewell'. The fire station proposal was eventually abandoned and the museum idea gathered strength.

In May 1899, the museum was officially opened by Lord John Hervey. The collections displayed came from three main sources. The Bury St Edmunds and West Suffolk Archaeological Institute had collected together many artefacts and had presented these to the Borough Council in 1878, since when they had been stored out of sight at the Athenaeum. The master of the workhouse in College Street (successor to the workhouse in Moyse's Hall) had collected Bury St Edmunds books, keys and coins, and these were bought. The first curator, J. Jennings, arranged a collection of furniture, weapons, clothing, ornaments, etc., all lent by local people. Early pictures of the museum interior show these borrowed articles, some of which look very fine.