Construction took place on the south lawn of the Rijswijk Palace on 23 March 1873 during the tenure of Governor-General James Loudon.

The new building was built in the southern part of the Rijswijk Palace grounds, directly facing Koningsplein (now Merdeka Square).

Construction of the palace was finished in 1879 during the tenure of Governor-General Johan Wilhelm van Lansberge.

[3][4] The Indonesian National Revolution (1945–1949) ended with the Netherlands' recognition of the Republic of Indonesia.

Several colonial buildings and residences were demolished in the Weltevreden area to make way for today's State Palace compound.

[6] When Suharto became president of Indonesia, he made changes to the previously residential function of the palace.

[3] The Merdeka Palace serves as an official venue for state events such as the Independence Day ceremony, welcoming (foreign) dignitaries, cabinet meetings, state banquets, and reception of letters of credence from foreign ambassadors.

A 17 m tall flagpole and a fountain are located on the front lawn of the Merdeka Palace.

The annual flag-raising ceremony takes place during Indonesian Independence Day on 17 August.

The palace once again became the official presidential residence during the Abdurrahman Wahid and Megawati administrations.

Susilo Bambang Yudhoyono sometimes resides in Merdeka Palace, however just like Suharto, he often prefers to reside in his own house, at Puri Cikeas, Gunung Putri district of Bogor Regency – West Java, south of Jakarta.