The Carmelite Order built the monastery on a parcel that had been occupied by a mosque during the Ottoman occupation of Hungary.

In the 1780s, Joseph II's Klostersturm forced the Carmelites to disband, and in 1786, an imperial decree converted the monastery into the Castle Theatre (Várszínház) "for the delectation of high-ranking court officials."

Notable performances during the imperial era included Ludwig van Beethoven and the premiere of Bánk bán.

The Hungarian government appropriated the Carmelite Monastery in 2014 and began further renovations in 2016 to prepare it for use as the prime minister's office.

With a three-story auditorium, and a capacity of 1200 seats, the premiere was held on 17 October 1787, from which on the theatre was home to mainly German productions for the next few decades.

According to a pact with the municipality of Buda, for a symbolic lease, a company from Kassa played in the theatre between 1833 and 1837, including acclaimed actors of the era, like Déryné, Márton Lendvay or Gábor Egressy.

From 1871, the theatre was home to the National Theater, and from 1885 to 1886, also hosted plays of the Népszínház the Opera House, and the Academy of Drama.