The hospital was founded in 1181 by Hugh de Puiset (Bishop Pudsey), to care for 65 lepers and dedicated to "our Lord, to the Blessed Virgin, to St. Lazarus and his sisters, Mary and Martha".

[1] The hospital was endowed with a range of lands, including Sherburn, Garmondsway Moor, Ebchester, Whitton, Raceby and Sheraton.

[1] Ralph Lever, canon of Durham Cathedral, was master of the hospital at the time of his death.

As a result, a new regime was introduced in 1857 by the charity commissioners meaning:[4] The chapel and the gatehouse are grade II* listed buildings.

[5][6] The hospital, as Sherburn House Charity, now provides residential care and sheltered housing for residents and former residents of the ancient diocese of Durham, and is a significant grant making body to individuals and local community groups, in line with the charity's objects.