John McDonogh died in 1850 leaving his estate to the cities of New Orleans and Baltimore, in equal proportions, for the establishment and support of free schools in the two cities and their suburbs. Through this bequest the City of New Orleans came into possession of real estate valued at $620,029.73.

These lands were sold and the proceeds were invested in bonds. Ordinance number 3958, passed on May 27, 1858, specified that the interest from these bonds was to go to the support of public schools as provided for in McDonogh's will. In 1855 the Board of Commissioners of the McDonogh School Fund was created. The first schools built with these funds were McDonogh Schools 1, 2,and 3 in 1874. By 1895 thirty schools had been built providing classroom space for over 16,000 students.

In 1950 the New Orleans City Council authorized liquidation of all securities of the fund and turned them over to the Orleans Parish School Board. As the schools were no longer the function of city government, there was no necessity to retain a Board to have custody and control of the fund. With the 1954 City Charter the Board of Commissioners for the McDonogh School Fund was abolished and the remaining monies were placed under the care of the Board of City Trusts.