The palace is located at the Magdalena Peninsula in the place where the old Fort of San Salvador de Hano was, which protected the entrance to the bay.

Construction of the palace was initiated in 1908 by the local government of Santander for the purpose of providing a seasonal residence for the royal family of Spain.

King Alfonso XIII and his family first arrived at the Palacio de la Magdalena on August 4, 1913, and returned annually to summer at the palace through 1930.

The royal family used the palace as a base for numerous recreational and sporting activities, and the king sometimes also held government meetings at the property.

The highlight of the interior is the reception rooms, which hold paintings of interest by artists such as Luis Benedito, Joaquín Sorolla y Bastida, and Fernando Alvarez Sotomayor.