The Spanish built Fort Matanzas in 1742 to guard Matanzas Inlet, located at the southern mouth of the Matanzas River. This inlet is also a potential back entry to St. Augustine. If they had used this path, they could have bypassed Castle de San Marcos, which served as St. Augustine's defenders' command and control center. St. Augustine was besieged for a total of 39 days in 1740 by Georgia Governor James Oglethorpe, who took advantage of this back access to the city.

The Spanish learned their lesson about the need to secure the inlet. Therefore, in 1740, under the leadership of Governor Manuel de Montiano, construction of the fort began, and it was completed the following year, in 1742. An engineer named Pedro Ruiz de Olano, who had previously worked on the Castillo de San Marcos, was the one who came up with the idea for the fortified observation tower. The fort was built by convicts, slaves, and Cuban troops on what is now known as Rattlesnake Island, and it provides a commanding view of Matanzas Inlet.

The fort was constructed of coquina, a shell stone that was extensively used in buildings in the area. The Spanish referred to the fort as the Torre de Matanzas (Matanzas Tower), also known as the Matanzas Tower.