The growing needs of the school necessitated physical expansion. In 1939, the school finally moved to Calle Magdalena (now Masangkay) from its location in Reina Regente Street.
The property in Calle Magdalena had been bought in 1928 through the efforts of Bishop Mosher, Rev. Hobart Studley and Mr. S.C. Choy. It occupied the block next to the location of St. Luke's Hospital, which was also run by the Episcopal Mission. The place was initially used as a playground where students had to be taken by the school bus for their P.E. classes only.
Soon, a mission home and a 15-room building were put in place, along with a renovated row of dormitory units. The school put up a benefit program at the Rizal Stadium in 1941 to raise more funds to help cover the cost of new construction. Next to rise was a new building on the La Torre side intended to house a library, dormitory and new classrooms. This building was completed in December 1941.
It was then that tragedy struck. Japanese forces invaded the Philippines upon the outbreak of the Pacific War. On December 8, 1941, the school operations came to an abrupt halt.
The school compound was eventually sealed off by the Japanese military and the mission house was turned over to a Japanese doctor-director of St. Luke's Hospital. The occupants were forced to move out and the rooms were used for Japanese civilian patients.
The Americans and British among the school staff became prisoners of war and were interned at the University of Sto. Tomas compound. The yet un-utilized new building was demolished and its fresh materials and equipment taken. The mission house was later taken over by Chinese guerilla units and used as headquarters during liberation.
After the war, a period of healing ensued. The challenge to recover, rebuild and reorganize required much dedication. Government-required incorporation and recognition papers were reconstructed and re-filed. School reopened in December 1945, through the determined efforts of the teachers and staff who worked under the direction of Mrs. Huang Ong Bi Gim.
The first full-term school year since the 1941 disruption opened in July 1946, remarkably with 500 children. Their number quickly grew to 900. Many other schools had remained closed and accommodations for the enrollment of girls and boys, unschooled for almost five years, became the St. Stephen's Girls' School's service to the community and contribution to nation-building.Mrs. Nancy L. Yao took on the role of principal in 1946 and Ms. Constance Bolderston was the directress.
In the words of the 1947 yearbook celebrating the 30th anniversary, the school community came together to offer prayers of thanks and praise to God for the divine blessing of surviving the war that had brought so much devastation.
Rebuilding soon followed. The 600-seat assembly hall with classrooms and an open play court was completed in 1949, on the site previously occupied by the Japanese-demolished structure. A basketball court and covered walks were next built. Then, a four-classroom annex was put up fronting Magdalena Street.
By then, the school had officially been renamed St. Stephen's High School. This development relieved the young male students of the perceived stigma and embarrassment of belonging to a so-called girls' school. The school resumed its normal activities and was back on track in no time. In 1952, the first English High School graduating class members received their diplomas.