The palace officially opened on 28 August 1913; it was originally built to provide a home for the PCA, a court created to end war by the Hague Convention of 1899.

It would be an "outward and visible sign" of the Court, which would make its actual, tangible existence known to the ends of the earth" At first Carnegie simply wanted to donate the money directly to the Dutch Queen Wilhelmina of the Netherlands for the building of the palace, but legal problems prohibited this, and in November 1903 the Carnegie Stichting was founded to manage the construction, ownership, and maintenance of the palace.

The palace is filled with many gifts of the different nations who attended the Second Hague Conference as a sign of their support.

Among the gifts are a 3.2-tonne (3.1-long-ton; 3.5-short-ton) vase from Russia, doors from Belgium, marble from Italy, a fountain from Denmark, wall carpets from Japan, the clock for the clock tower from Switzerland, Persian rugs from Persia, wood from Malaysia, Indonesia, Brazil and the United States of America and wrought-iron fences from Germany.

The construction began some months later and was completed with an inauguration ceremony on 28 August 1913, attended by Andrew Carnegie, among others.

Like the new Academy Hall, the library was designed by architects Michael Wilford and Manuel Schupp [de].

The palace also features a number of statues, busts and portraits of prominent peace campaigners from around the world and of all eras.