The Lacawac Sanctuary was once part of a 20,000-acre parcel of forested land along Wallenpaupack Creek owned by heirs of the Penn family, the "Wallenpaupack Manor". Until its sale to Burton G. Morss in 1849, the land was not timbered or otherwise developed. Between 1849 and 1895 the Morss family supported a large lumber mill and tannery on timber and hemlock bark cuttings from the former manor, including the Lake Lacawac watershed. The Lacawac property was never converted to agricultural uses, since the soil is thin, acidic, rocky, and often steep. The second growth forest was culled for merchantable timber in 1949, and was extensivelydamaged by windthrow during hurricanes that followed in 1950 and 1954. The remains of a small sawmill built by Arthur Watres date to salvage operations following the blow-downs.

The Lodge, Carriage House, Ice House and other outbuildings were constructed in 1903 by William Connell, a coal mine operator and U. S. Congressman from Scranton. The Lodge was unusual for its time as a summer estate in rural Wayne County, both in its construction material (southern yellow pine) and in advanced conveniences such as running water (pumped from Lake Lacawac) and gas lighting (from acetylene generated on-site). Mr. Connell also reintroduced white-tailed deer to redress the loss of large game caused by unrestricted hunting during the 19th century. Today's large deer population presumably descends from these deer, and from a larger herd established at the Blooming Grove Hunting and Fishing Club nearby in Pike County. In 1913, the Lacawac property was purchased from the Connell heirs by Colonel Louis A. Watres, a newspaper publisher, business organizer, and politician (state senator, lieutenant governor). The property was acquired as part of the land consolidation leading to construction of the Wallenpaupack reservoir, of which Colonel Watres was a proponent and organizer. Shortly after  the dam and hydroelectric generation plant were completed in 1926, the reservoir was sold to the Pennsylvania Power and Light Company, which operates it today. The Watres family used their summer house only sporadically until Arthur Watres and his mother moved there after 1945.