In 1950, six Finnish child welfare organisations leased an area in the middle of a recreational zone in Helsinki, consisting of two parks, to establish an amusement park. Initially, the lease was granted for three years. However, in 1953, the city extended the lease and allocated 5.37 hectares (13.3 acres) for the park. Following the city plan approved in 1956, the amusement park was further expanded to over 7.2 ha (18 acres). In 1957, the welfare organisations formed the non-profit Children's Day Foundation, which continues to manage and develop the amusement park. Today, the site covers 7.5 hectares (19 acres).

Linnanmäki, as the amusement park is known, is built on a hill and takes its name from Vesilinnanmäki (lit. 'Water Castle Hill'), a name given by locals in the early 20th century due to the presence of two water towers built in 1876 and 1938, respectively. Although the towers were disconnected from the water grid in 2003 and are no longer operational, they are protected by the city's zoning plan and cannot be demolished. There have been plans to utilize the towers year-round in support of the amusement park's activities. The older, angular tower, located near the park's perimeter and the oldest water tower in Helsinki, currently serves as a maintenance and storage facility for the park. The newer, cylindrical tower, which dominates the park and its surroundings, houses an indoor roller coaster called Linnunrata eXtra.