The mill, alongside the Old Coach Road, was built in 1782 for making shawls. It was the lower of two mills built at the same time. The other (now called Speedwell Mill) was for making tape. Both mills were powered by water held in two large man-made ponds. The water was fed into the mills through pipes mounted on walls. The mills housed huge waterwheels. The one in the upper mill had a diameter of 41.5 feet. The water in the ponds was retained by dams.

Both ponds were fed in series from Knabhall Brook. This flows southwards from Tansley Moor. The water was good for treating cotton as it contained little lime, having run over acidic Millstone Grit rock. The brook joins another one just below Scholes Mill. It joins Bentley Brook in Lumsdale. Bentley Brook, in turn, joins the Derwent at Matlock Green.

Today, Scholes Mill is a beautiful Grade II Listed Building, restored and converted recently by Wardmans Ltd. of Tansley to form 4 floors of office accommodation.