In 1662 Countess Sophie Theodore, a scion of the Holland-Brederode family and wife of the Brandenburg general Christian Albert of Dohna, acquired the lands Niederschönhausen and Pankow, then far north of the Berlin city gates.

Minister Joachim Ernst von Grumbkow acquired it in 1680 and, in 1691, his widow sold it for 16,000 Thalers to the Hohenzollern elector Frederick III of Brandenburg, who had fallen in love with the property earlier.

As a result, civil servants, such as Minister Friedrich Wilhelm von Grumbkow, moved in to use it as office space, part of the land was leased and both the palace and the park slowly became dilapidated in the ensuing years.

During the Seven Years' War in 1760, while the queen retreated to the Magdeburg fortress, Russian troops pushed deep into Prussia, occupied Berlin and devastated Niederschönhausen Palace.

The Prussian ruling Hohenzollern dynasty owned Schönhausen Palace until it was dispossessed and became a property of the Free State of Prussia in 1920, following the end of the monarchy in the course of the German Revolution of 1918–1919.

During the Battle of Berlin at the end of World War II, the palace suffered some damage but was repaired almost immediately by a Pankow Künstlerinitiative so that it could be used for an exhibit as early as September 1945.

For this purpose, it was again renovated and expansion of the complex took place to the north for garages for the vehicle fleet of the President and to the south for a casino and a chancellery in a prestigious courtyard with two gatehouses.

Numerous state visitors lodged here, among them Indira Gandhi, Fidel Castro, the last Soviet president Mikhail Gorbachev, and his wife Raisa Gorbachova, in October 1989 on the eve of the East German Peaceful Revolution.

In 1994, 100 years after the revival of the Olympic Games, the representatives from Argentina, Austria, China, Cyprus, Ecuador, France, Germany, Greece, Kazakhstan, Libya, Liechtenstein, Lithuania, Mexico, Nigeria, Philippines, Poland, Russia, Slovakia, Switzerland, United States, who arrived to the founding congress of the International Delphic Council to establish the Delphic Games of the modern era, met at the palace.

Furthermore, due to impregnation of the roof structure with chemicals to protect the wooden beams, for several years only the two lower floors could be used for occasional celebrations and guided tours.