After Don Pedro de Peralta established Santa Fe in 1609, the Palace of Governors was built as the capital building for the Nuevo Mexico colony. The Palace was part of a larger series of structures, the Casa Reales, and used for 300 years as the headquarters and residence of each governor.

The Pueblo Indians seized the city at the end of the 17th century, destroying every building but the Casa Reales and making a pueblo out of it. Don Diego de Vargas rescued and fortified the city and "El Palacio Real", as it was known then.

During the Mexican-American War, the U.S. Army occupied the building, calling it the "Adobe Palace" and building Fort Marcy close by. The Confederate forces would briefly use the Palace during the battle of Glorieta.

As America's oldest continuously occupied public building in America's oldest capital city, the Palace has seen the progression of the Spanish Kingdom of New Mexico, Nuevo Mejico, New Mexico territory, and New Mexico state. Thus the building is the prime location for the state's history museum, as it has been for the last century, though more facilities have been added.