The original cornerstone was laid in 1443, but the royal residence only began to take on its final form in 1701. Architect Andreas Schlüter designed the palace facades in the Italian style. With its 1,210 rooms, the City Palace subsequently became known as the biggest Baroque building north of the Alps.

During the Second World War the palace caught fire during an air raid. The fire destroyed virtually all of the state rooms in the north and south wing. Other parts of the building survived, including the outer walls with their sculptured decorations, the supporting walls, and the main stairwells.

Exhibitions were held in the post-war years in the surviving parts of the building. In 1950, however, the communist East German government decided it wasn't part of German cultural heritage and gave the order for it to be destroyed, despite many protests. In its place the Marx-Engels-Square was created as a location for mass rallies.

In the 1970s, East German leader Erich Honecker had the Palast der Republik built on the site. It became the seat of the East German parliament, but the building also served various cultural purposes as well as being home to numerous bars and restaurants. After the fall of the Berlin Wall the building was closed because of its asbestos content, and later torn down.

After German reunification, there was a passionate discussion about the possible reconstruction of the Berlin City Palace. In 1993, a pro-construction lobby group landed a coup by erecting a scaffold with a life-size canvas mock-up based on historical pictures of the City Palace façade. In 2002, the German parliament voted to have the palace reconstructed.

In 2008, the design by Italian Franco Stella won the architectural competition to rebuild the palace. His design combines the Baroque exterior with a more modern interior. The reconstructed Berlin City Palace is to house an international art and cultural center known as the "Humboldt Forum."

The "Humboldt Box" has become a temporary Berlin landmark - since 2011 it serves as an information center on the past and future of the City Palace. It attracted 100,000 visitors in the first 50 days alone. Visitors can also enjoy a panoramic look at how the reconstruction work is progressing from the viewing platform.

On June 12, 2013, German President Joachim Gauck laid the cornerstone, which has two numbers engraved on it: 1443 and 2013, the date when the cornerstone for the historical palace was originally laid and, of course, the date the reconstruction began.

While the walls are being constructed the Schlossbauhütte palace builders' shed, is making Baroque façade decorations. Using historic designs, sculptors are creating some 3,000 original pieces. The palace façade cost about 80 million euros ($90 million), most of which will be financed with donations. The finished palace will cost some 590 million euros, most of which will be financed by the state.

In 2016, gray concrete dominated the site - but this will change when the Humboldt Forum is opened. Then, Berlin Museums will exhibit their non-European cultural treasures here, while the Humboldt University begins holding international conferences. The Palace courtyard will serve as a backdrop for music and theater performances.