This church is one of many in Rome dedicated to St. Lawrence, including the more ancient and then extra-urban Basilica di San Lorenzo Fuori le Mura, that was rebuilt by the same Pope Damasus I.

The original basilica of San Lorenzo in Damaso was demolished by Cardinal Raffaele Riario, a nephew of Pope Sixtus IV who commissioned the imposing Renaissance-style Palazzo della Cancelleria (1489–1513).

The palace was built of spolia and stone from nearby ancient Roman buildings, including the Colosseum, and enveloped the new basilica of San Lorenzo in Damaso under the right wing; the entrance is located at Number 1, Piazza della Cancelleria, on the right flank of the façade.

The design of the Palace has been attributed to Francesco di Giorgio Martini and Baccio Pontelli, while Filippo Titi suggests Donato Bramante and other authors have cited Giuliano da Sangallo and Andrea Bregno.

Immediately to the right of the entrance is the memorial to Alessandro Valtrini, a minister of Pope Urban VIII, that Gian Lorenzo Bernini designed in 1639.

His murder in 1848 in the adjacent Palace was one of the events that led to the ensconcement of the Pope in the Vatican City and the annexation of the Papal States to the Kingdom of Italy.

The first chapel to the left has the tomb and funerary monument of Cardinal Ludovico Trevisan, Patriarch of Aquileia, with a recumbent statue by Paolo Romano.

A chapel near the sacristy has an altarpiece depicting the Madonna delle Gioie by Nicolò Circignani, denominated "il Pomarancio", and two silver statues of St. Lawrence and St. Damaso by Ciro Ferri.