Prefabrication is the practice of assembling components of a structure in a factory or other manufacturing site, and transporting complete assemblies or sub-assemblies to the construction site where the structure is to be located. Some researchers refer it to “various materials joined together to form a component of the final installation procedure“.

The most commonly cited definition is by Goodier and Gibb in 2007, which described the process of manufacturing and preassembly of a certain number of building components, modules, and elements before their shipment and installation on construction sites.

The term prefabrication also applies to the manufacturing of things other than structures at a fixed site. It is frequently used when fabrication of a section of a machine or any movable structure is shifted from the main manufacturing site to another location, and the section is supplied assembled and ready to fit. It is not generally used to refer to electrical or electronic components of a machine, or mechanical parts such as pumps, gearboxes and compressors which are usually supplied as separate items, but to sections of the body of the machine which in the past were fabricated with the whole machine. Prefabricated parts of the body of the machine may be called 'sub-assemblies' to distinguish them from the other components.

An example from house-building illustrates the process of prefabrication. The conventional method of building a house is to transport bricks, timber, cement, sand, steel and construction aggregate, etc. to the site, and to construct the house on site from these materials. In prefabricated construction, only the foundations are constructed in this way, while sections of walls, floors and roof are prefabricated (assembled) in a factory (possibly with window and door frames included), transported to the site, lifted into place by a crane and bolted together.

Prefabrication is used in the manufacture of ships, aircraft and all kinds of vehicles and machines where sections previously assembled at the final point of manufacture are assembled elsewhere instead, before being delivered for final assembly.

The theory behind the method is that time and cost is saved if similar construction tasks can be grouped, and assembly line techniques can be employed in prefabrication at a location where skilled labour is available, while congestion at the assembly site, which wastes time, can be reduced. The method finds application particularly where the structure is composed of repeating units or forms, or where multiple copies of the same basic structure are being constructed. Prefabrication avoids the need to transport so many skilled workers to the construction site, and other restricting conditions such as a lack of power, lack of water, exposure to harsh weather or a hazardous environment are avoided. Against these advantages must be weighed the cost of transporting prefabricated sections and lifting them into position as they will usually be larger, more fragile and more difficult to handle than the materials and components of which they are made.

Prefabrication has been used since ancient times. For example, it is claimed that the world's oldest known engineered roadway, the Sweet Track constructed in England around 3800 BC, employed prefabricated timber sections brought to the site rather than assembled on-site.^{[citation needed]}

Sinhalese kings of ancient Sri Lanka have used prefabricated buildings technology to erect giant structures, which dates back as far as 2000 years, where some sections were prepared separately and then fitted together, specially in the Kingdom of Anuradhapura and Polonnaruwa.