During a period in which much of the surrounding area was being developed, a new church was considered as an essential local amenity. The copyhold for the site of the church on Downshire Hill was purchased from the Manor of Belsize in 1812 by a group which passed this in 1817 to a trio comprising Christian minister James Curry, "speculative" builder William Woods and lawyer Edward Carlisle, Woods being involved in other development, both in Hampstead and elsewhere in London. Curry had offered to pay the cost of the building project if he was appointed minister. The dedication of the new church to St John may indicate that it was originally intended as a chapel of ease for the parish church of St John-at-Hampstead
The building was completed in 1823, with the first service held on 26 October 1823. The first minister of the church was William Harness, a lifelong friend of Lord Byron (Curry had fallen ill by the time of the church's opening, and died soon after the opening; Woods also surrendered his interest in the building in January 1824). Harness departed in 1825 and was followed by a group of four ministers who remained for only short period.
In 1832, the copyhold was purchased by John Wilcox, an admirer of George Whitefield, with the aid of a loan from a local dissenter. Wilcox established evangelical ministry at the church, but encountered opposition from Samuel White, perpetual curate of the parish of St John, Hampstead, whose permission was required to conduct services in the parish, since Downshire Hill was at that time located in the same parish. Unlike Wilcox, who was the son of a Gloucester publican, White had effectively inherited his curacy in Hampstead from his father, and a contemporary periodical noted theological differences between White and Wilcox's Calvinist doctrinal position. Wilcox had made known that he would preach as a dissenter if not given permission to as an Anglican minister and, after he ignored a letter from White informing him he did not have White's permission to officiate at services at St John's Downshire Hill, White began proceedings against Wilcox for officiating without the permission of the incumbent
A consistory court ruled in favour of White, but local feeling was on the side of Wilcox. The poet John Keats, who was living nearby at the time in what is now Keats House had earlier referred to White as "the Person of Hampstead quarrelling with all the world" and a petition was organised and signed by influential local people including the then Lord of the Manor of Belsize, Lord Galloway, and Sara Coleridge. The outcome of the case also attracted strong criticism at the time in the Church of England magazine:
The decision of the court, however, prevailed, the church closed until 1835, and the church's name remained infamous in ecclesiastical circles for some years following. Wilcox remained in the area during this time, apparently devoting his time to educating local children at a St John's Church School which he had founded at his own expense, also on Downshire Hill, before dying in December 1835.