Established as part of the "People's Theatre" (Volksbühne) movement, the Slavicist and intellectual Raphael Löwenfeld, founding member of the Central Association of German Citizens of the Jewish Faith, was the initiator and manager of the original ensemble.

Likewise, the Charlottenburg venue was meant to provide socially marginalised groups with access to stage plays by Henrik Ibsen, Gerhart Hauptmann, and particularly Leo Tolstoi, whose works Löwenfeld himself had translated into German.

After the Nazi seizure of power, the Prussian prime minister Hermann Göring had the Schiller Theater transferred into the possession of the City of Berlin in December 1933.

Baumgarten simplified the facade and the auditorium considerably, changing the appearance of the theatre with respect to the New Objectivity of the 1920s, but also in line with the prevailing monumental Nazi architecture trend.

From the re-opening with Schiller's Kabale und Liebe in the presence of Adolf Hitler on 15 November 1938, the theatre was run as Schiller-Theater der Reichshauptstadt Berlin.

Under the management of Boleslaw Barlog, the Schiller Theater became the leading West Berlin stage, only rivalled by the Schaubühne ensemble around Peter Stein from the 1970s onwards.

After lengthy discussions, the Schiller Theater was closed on 3 October 1993, three years after German reunification, on a decision of the Berlin Senate due to the increasing indebtedness of the city.

The last performance of the state theatre was the premiere of the play Weißalles und Dickedumm (Quisaitout et Grobêta) by Coline Serreau, starring Katharina Thalbach.