1540s, figurative, "destruction, overthrow;" 1610s, literal, "action of pulling down or destroying (a structure); fact of being demolished," from French demolition "demolition; defeat, rout" (14c.), from Latin demolitionem (nominative demolitio), noun of action from past-participle stem of demoliri "to tear down," from de "down" (see de-) + moliri "build, construct," from moles (genitive molis) "massive structure" (see mole (n.3)).
Mencken noted demolition engineer for "house-wrecker" by 1936. Demolition derby is recorded from 1956, American English, defined by OED as "a contest in which old cars are battered into one another, the last one running being declared the winner."