[2] The first records of a structure at this location date from AD 973, a fort belonging to the Polabian Slav tribe of the Obotrites on an island in the large lake of Schwerin.

In 1160, the fort became a target of Germanic noblemen planning to expand their territory eastward under the leadership of Henry the Lion (1129–1195).

The German conquerors recognised the island's strategic and aesthetically interesting location and started building a new fort.

In 1167, Henry gave the County of Schwerin to his vassal Gunzelin von Hagen, and the rest of the country around the city was returned to Niklot's son Pribislav, forming a hereditary ducal line that lasted until 1918.

The early Venetian Renaissance gate, its gable showing the carrying of the cross, was made by Hans Walther (1526–1600), a sculptor from Dresden.

Windows on the northern face show biblical illustrations by Flemish artist Willem van den Broecke (also known as "Paludanus"; 1530–1579).

Despite its island site, the ducal residence needed additional defences; sometime in the middle of the 16th century, bastions were established to the northwest, southwest and southeast.

Before the Thirty Years' War, the architect Ghert Evert Piloot, who had entered Mecklenburg's service in 1612, made plans to completely rebuild the palace in the style of the Renaissance in the Low Countries.

Piloot's plans were partially realized between 1635 and 1643: the house above the palatial kitchen and that above the chapel were razed and given Dutch Renaissance style façades.

Grand Duke Friedrich (1800–1842) instructed his architect Georg Adolph Demmler (1804–1886) to remodel the palace.

A few months later, construction was halted by his successor, Friedrich Franz II (1823–1883), who wanted a complete reconstruction of the historic site.

Other legends describe him as a long-bearded blacksmith, night watchman, or prankster to those who would seek to harm or steal from the castle.