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In 1917 the Cabinet decided that a National War Museum should be set up to collect and display material relating to the Great War, which was then still being fought. The interest taken by the Dominion governments led to the museum being given the title of Imperial War Museum. It was formally established by Act of Parliament in 1920 and a governing Board of Trustees appointed.

The Museum was opened in the Crystal Palace by King George V on 9 June 1920. From 1924 to 1935 it was housed, under very difficult conditions, in two galleries adjoining the former Imperial Institute, South Kensington.

On 7 July 1936 the Duke of York, shortly to become King George VI, reopened the Museum in its present home. The Museum was closed to the public from September 1940 to November 1946 and vulnerable collections were evacuated to stores outside London. Most of the exhibits survived the war, but a Short seaplane, which had flown at the Battle of Jutland, was shattered when a German bomb fell on the Naval Gallery on 31 January 1941 and some of the naval models were damaged by the blast.