On October 4, 1863, Bishop Farrell laid the cornerstone for a huge church which was meant to occupy most of the hill. The inscription in the cornerstone read: "His Lordship Right Rev. John Farrell, D.D., First Bishop of Hamilton, blessed and laid the first stone of this church, to be built to the honor of God, under the protection of the Blessed Virgin Mary, conceived without sin, and of St. Bartholomew, Apostle and patron of the Parish, the 4th day of October, the Feast of the Holy Rosary of the B.V.M., A.D., 1863. Pius IX, Pope; Flavian Turgeon, Archbishop; Very Revs. Ed. Gordon, V.G., JohnWalsh, V.G., Revs M.M. O'Shea, S. Maheaut, Ed. Gowalski, J. Holzer, S.J., Sup., Db. Petit, S.J., J. Archambault, S.J., N. Sorg, S.J., assisting Victoria, Queen; Lord Monck, Governor-General of Canada; H.W. Peterson, Mayor of Guelph."
Construction of the church was begun, but the project was abandoned after a debt of $20,000 had been accumulated. It simply seemed impossible to continue. Legend has it that Father Holzer was a friend of the Emperor Maximilian of Mexico, who supplied the funds, and that when Maxiilian was shot in 1867 the funds stopped, and so did the building of the church. It is unlikely that this legend has a basis in fact. The problems in financing the church arose long before the death of Maximilian. It may well be that Father Holzer, searching for ways to solve the financial problems of the parish, mentioned a desire to seek a contribution from Maximilian
Father Holzer's pastorate ended in 1864, when worn out by his labours, he suffered a stroke. In 1875 he visited Guelph for the last time, and died at Georgetown University, Washington, on April 23, 1888, a few months before the opening of the present church.
In 1874 Father P. Hamel, S.J., began plans for the Church of Our Lady. He appointed Joseph Connolly as architect. Connolly designed many churches in 19th century Ontario, including St. Peter's Cathedral in London, though the Church of Our Lady is considered to be his masterpiece.
On July 10, 1876, Bishop Crinnon of Hamilton turned the sod for the new church, and on July 5, 1877, Bishop Conroy, Apostolic Delegate to Canada, laid the cornerstone Construction began at the rear of St. Bartholomew's, and was to continue for over ten years. In 1883 Rev. W. Doherty became pastor. On September 12, 1885, he supervised the burial under the chapels behind the sanctuary of the new church of Fr. Thomas Gibney, Fr. James Sherlock, S.J., Fr. Caspar Matoga, S.J., and Sr. Ursula Heenan, all of whom had been buried in the cemetery which had been beside St. Bartholomew's.
In 1887 work had reached the stage at which St. Bartholomew's could be demolished, and on October 10, 1888, almost two thousand people attended the ceremony as the Church of Our Lady was dedicated by Bishop Dowling of Peterborough (since the see of Hamilton was vacant at the time). The next year Bishop Dowling became Bishop of Hamilton. Bishop Walsh of London preached the sermon, and pointed out that though there were many magnificent old cathedrals constructed by kings and men of wealth, the Church of Our Lady was built by the generosity, sacrifice, and labour of the poor immigrant settlers of Guelph, "by money raised from the workingmen who had built our canals and railways - servant girls, mechanics and other hard-working people."