In 1849 the British seized control of Lahore from the Sikh Empire. During the British Raj, the mosque and the adjoining fort continued to be used as a military garrison. The 80 cells built into the walls surrounding its vast courtyard were demolished by the British after the Indian Rebellion of 1857, so as to prevent them from being used for anti-British activities. The cells were replaced by open arcades known as dalans.
Because of increasing Muslim resentment against the use of the mosque as a military garrison, the British set up the Badshahi Mosque Authority in 1852 to oversee the restoration and to re-establish it as a place of religious worship. From then onwards, piecemeal repairs were carried out under the supervision of the Badshahi Mosque Authority. The building was officially handed back to the Muslim community by John Lawrence, who was the Viceroy of India.The building was then re-established as a mosque.
In April 1919, after the Amritsar Massacre, a mixed Sikh, Hindu and Muslim crowd of an estimated 25,000-35,000 gathered in the mosque's courtyard in protest. A speech by Gandhi was read at the event by Khalifa Shuja-ud-Din, who would later become Speaker of the Provincial Assembly of the Punjab.
Extensive repairs commenced from 1939 onwards, when Sikandar Hayat Khan began raising funds for this purpose.Renovation was supervised by the architect Nawab Alam Yar Jung Bahadur. As Khan was largely credited for extensive restorations to the mosque, he was buried adjacent to the mosque in the Hazuri Bagh.