The compound was built in 1907–1914 by the Empress Augusta Victoria Foundation as a center for the German Protestant community in Ottoman Palestine, in addition to the slightly older Church of the Redeemer from Jerusalem's Old City.

Apart from the hospital, today the complex also includes the German Protestant[2] Church of the Ascension with a c. 50 metre high belltower, a meeting centre for pilgrims and tourists, an interreligious kindergarten and a café, as well as the Jerusalem branch of the German Protestant Institute of Archaeology.

It is the second largest hospital in east Jerusalem, as well as the sole remaining specialized care unit located in the West Bank or Gaza Strip.

In 1927, the buildings were severely damaged in an earthquake[7] and the pointy roof of the belfry was rebuilt by 10 metres shorter.

[8] In the mid-1930s, when the building was about to reopen as a hostel run by Deaconesses, the management decided to bar Jewish guests to preserve the institution's Christian character.

[6] Under Jordanian administration, technically under United Nations Truce Supervision Organization control, it was a military hospital for soldiers from the Arab Legion.

[citation needed] During that war the building was heavily damaged, the upper floor was devastated by fire and was only rebuilt in 1988.

[12] Since its re-establishment in 1950 Auguste Victoria Hospital has been primarily run and financed by The Lutheran World Federation and the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA).

[5][11] The hospital mission statement includes the provision of health care without regard to race, creed, gender, or national origin.

A pediatric oncology ward for Palestinian children opened in April 2005 in a joint project with the Peres Center for Peace, various Italian foundations and the Hadassah University Hospital, which trained the oncologist and nursing staff.