The origin of the Prince Edward Island Court of Chancery is unclear. Doubtless it was established by royal authority but no special warrant or instructions evidencing such authority are now available. It is possible that the broad powers conferred on the first governor to establish courts of judicature was considered wide enough to constitute this separate court of equity. In any case the court went into operation at an early date, presided over, in the capacity of chancellor, by the governor or the person administering the government in his absence. It appears that the chancellor was advised on legal points by the chief justice and the attorney-general. As thus constituted, it seems to have been a powerful engine in the hands of the executive for achieving obliquely political and/or personal ends.

In 1848 the court was placed on a working basis by 11 Vic. Cap. 6 "An act to authorize the appointment of a Master of the Rolls to the Court of Chancery, and an Assistant Judge of the Supreme Court of Judicature in this Island". Under this legislation His Majesty was empowered to appoint a fit person to combine and fill the offices of master of the rolls to the court of chancery and assistant judge of the supreme court. He was to be the responsible advisor and judge of the court of chancery except in cases of appeal from his decisions to the Chancellor. He was empowered to sign rules, orders and decrees but the signature of the chancellor was still necessary to the enrollment of degrees. The signature of the Chancellor was dispensed with by an act of 1879. The first person to fill this position was Hon. James H. Peters, followed by Hon. Edward Jarvis Hodgson.

In 1869 by the statute 32 Vic., Cap 4, the Lieutenant Governor in Council was authorized to appoint a fit person to combine the offices of assistant judge of the supreme court and vice chancellor of the court of chancery with co-ordinate jurisdiction with the master of the rolls. The Hon. Joseph Hensley was appointed to this position, succeeded by the Hon. Rowan Robert Fitzgerald. The Chief Justice of the Supreme Court had jurisdiction in the Court of Chancery only in cases where the master of the rolls and the vice chancellor were both disqualified from acting or he was requested to act by one of the chancery judges.

The Chancery Act of 1884 provided for a Court of Chancery consisting of the Rolls Court and the Court of the Vice Chancellor. In practical terms there was no difference between the two judges who had the same powers. Cases came before the chancery judges by bill of complaint, petition and prayer, as distinct from writs before the Supreme Court. Matters before the court usually involved trusts, mortgages, estates, lunacy, and adoption where equity was required. Appeals in chancery were lodged in the Court of Appeal and Equity consisting of the Chief Justice of the Supreme Court and the judge from chancery who did not sit on the original hearing.

The Court of Chancery was abolished and its responsibilities transferred to the Supreme Court in 1974.