The Institute was set up in 1951 at Mason Croft, the former home of novelist Marie Corelli.

Budgetary problems forced it to be relocated to the main campus at Birmingham during the 1970s, but under the guidance of Professor Stanley Wells, the Institute was returned to Mason Croft in the 1980s and its position was consolidated in 1996 with the opening of the purpose-built Shakespeare Institute Library.

It has been described by the current director, Michael Dobson, as "the best place on earth in which to explore the impact Shakespeare’s work has had across four centuries of world culture".

The library aims to collect every significant publication for the study of Shakespeare and Renaissance drama and the supporting collections cover literary, cultural, political, religious, and social history of the period.

The first recorded production was A Yorkshire Tragedy (Unknown Author) as The Shakespeare Institute Dramatic Society.