The Lighthouse Service originally contracted the Lilac on 13 April 1931 to Hampton Roads Shipbuilding of Portsmouth, Virginia. She was designed as a
coastwise tender and was to be named the Azalea. Pusey & Jones Company underbid Hampton Roads Shipbuilding, however, and the former was awarded the contract and the tender's name was changed to Lilac.
She entered service in 1933 and was stationed in the Fourth Lighthouse District and was based out of Edgemoor, Delaware, where she conducted general aids to navigation work in the Delaware River area. When the Lighthouse Service merged with the Coast Guard in 1939, she then became a Coast Guard cutter but her homeport remained Edgemoor, although that harbor fell under the jurisdiction of the Fifth District. She was armed during the war but saw no action. Her armament was removed at the end of hostilities. She remained at Edgemoor until 1948 when she was transferred to Gloucester City, New Jersey. Continuing with her general aids to navigation work, she was nevertheless frequently called upon to assist during search and rescue cases. On 15 to 17 May 1952 she assisted following the collision between the motor vessels Barbara Lykes and F. L. Hayes in the Chesapeake and Delaware Canal. On 22 May 1952 she assisted the tug Pateo and the Atlantic Dealer in the Delaware River. On 26 May 1952 she assisted following the collision between the tanker Michael and the motor barge A. C. Dodge near Ready Island. On 30 January 1953 she assisted the fishing vessel Benjamin Brothers in the Delaware River. From 6 to 12 June 1953 she assisted following the collision between the tankers Pan Massachusetts and the Phoenix in the Chesapeake and Delaware Canal. On 24 and 25 June 1953 she fought the fire on board the tanker Pan Georgia
and searched for survivors in the Christina River. On 30 December 1953 she assisted the motor vessels Atlantic Dealer and Atlantic Engineer in the
Delaware River. On 13 July 1955 she assisted the yacht Nip and Tuck in the Delaware River.
She was donated to the Harry Lundeberg Seafarers International Union seamanship school in Maryland.
By 1999 the LILAC was being advertised for sale in maritime journals. The non-profit Tug PEGASUS Preservation Project based in New York City began negotiations toward purchase of the vessel in 2002. She was refloated on February 25, 2003, and towed to a shipyard in Norfolk, Virginia to be dry-docked. After a very favorable report on the condition of the ship’s hull, she was purchased on March 11, 2003, with the intent to eventually return her to operation as a steam vessel based in New York harbor. Before leaving the Norfolk dry-dock, the ship’s hull was cleaned and preserved, and she was painted externally to the top of the stack. She was towed to New York, to a temporary Brooklyn berth provided by American Stevedoring. She took up residence at Hudson River Park's Pier 40 on January 1, 2004 and in February of that year ownership was transferred from the Tug PEGASUS Preservation Project to the newly created non-profit LILAC Preservation Project. She moved to the newly built Pier 25 in Tribeca in May, 2011. Operated as a museum ship, LILAC hosts cultural events and exhibitions while undergoing restoration.