She was built as a four-masted schooner in 1913 by the Danish shipyard Frederikshavns Værft og Flydedok under her original name Morten Jensen and initially sailed as a freighter for F. L. Knakkergaard in Nykøbing Mors.

Von Luckner had previously commanded the SMS Seeadler (1915), a sailing ship used as a commerce raider, during the First World War and won fame for his outsized personality, daring and compassion.

In a white squall on 26 July 1932, the ship capsized near the German island of Fehmarn in the Baltic Sea (54°35.7′N 11°11.2′E / 54.5950°N 11.1867°E / 54.5950; 11.1867)[3] and sank within minutes as due to the hot weather, all hatches and portholes were open.

On 18 September 1933 the wreck was ceremonially sunk by the torpedo boat Jaguar, attended by much of the then-small German navy.

The Prussian State Mint issued a Niobe memorial coin to help raise money for a replacement ship, and soon earned 200,000 Reichsmarks towards the effort, and spurred the building of the Gorch Fock in a record 100 days.