
AVMA was the brainchild of the late Limestone County veterans service officer (VSO) Kenneth David. As the VSO, David assisted veterans with accessing their Veterans Administration benefits including compensation and pensions, medical care, military records, grave markers, and veteran home loans. In celebration of the 50th anniversary of the conclusion of World War II, David collected various artifacts and memorabilia from veterans throughout the state to create an exhibit on Alabama veterans. At the time, several veterans came together to show off their artifacts and it was decided that artifacts not claimed by their original owners would be used to create a new museum to commemorate the sacrifice and contributions of U.S. soldiers from the American Civil War through the present day.

In 2000, the AVMA officially opened its doors with only a few simple displays. Two years later, on November 10, 2002, the AVMA hosted a grand opening and dedication service. The guest speaker was Johnny Spann of Winfield, Marion County, the father of Mike Spann, the Winfield native who was the first American to have lost his life in Afghanistan in 2001 in the Global War on Terror. Since 2002, the museum collection has grown significantly through additional volunteer donations, leading to renewed efforts by museum staff and volunteers to expand the museum.

AVMA mainly relies upon donations and daily volunteers, who perform ground and building maintenance and give guided tours. The AVMA's current full-time director and only paid staff member is Sandra "Sandy" Thompson, who is a retired Air Force Master Sergeant with 20 years of service. Under her direction, the museum has sought to institute a variety of programs and activities to bring in more members for the Alabama Veterans Museum Foundation, raise funds, and increase the number of tourists visiting the museum. Some of these new activities include blood drives, an annual fish fry, political rallies, military shows, and participation in a yearly Veterans Day Parade. These efforts also include memorial programs such as Flags Over Athens, 9/11 Remembrance, the 9/11 Heroes Run, POW/MIA Remembrance, Pearl Harbor Remembrance, Women in the Military, scavenger hunts for children called "Spot the History," and Call to Veterans, during which veterans from all over northern Alabama are invited to a free meal to honor their service.
One of the most popular fundraisers for the museum is the "Threads of Honor" program. Patrons can donate money to have veterans' names and other military information hand stitched by local quilters into a quilt that hangs in perpetuity in the museum in their honor. Money from the program goes toward funding an expansion of the AVMA's footprint to house its ever-growing collection of visitor-donated artifacts. The most popular and well-attended event offered by the museum is the monthly "Coffee Call." Hosted on the first Saturday of every month, the event offers visitors and locals the opportunity to meet and talk with veterans while enjoying a free breakfast. Each event is sponsored by a local business or group of veterans or civilians in honor of the men and women who gave their lives in the service of the United States military.
The AVMA is located at 114 W. Pryor Street. It is open Monday through Saturday and can host group tours. The museum has no admission fees; it is run entirely on donations and staffed by volunteers. Museum officials estimate that more than 12,000 individuals visit the AVMA each year. In 2009, the Alabama Mountain Lakes Association honored the AVMA with the 2009 PEAK Award as Attraction of the Year for contributing to tourism in north Alabama.