The trompe-l'œil onstage scenery, designed by Vincenzo Scamozzi to give the appearance of long streets receding to a distant horizon, was installed in 1585 for the first performance held in the theatre, and is the oldest surviving stage set still in existence.

The full Roman-style scaenae frons back screen across the stage is made from wood and stucco imitating marble.

[3] Palladio, a founder of the Olympic Academy (the Accademia Olimpica, created in 1555), had already designed temporary theatre structures at various locations in the city.

[4] In 1579, the academy obtained the rights to build a permanent theatre in an old fortress, the Castello del Territorio, which had been turned into a prison and powder magazine before falling into disuse.

Palladio was asked to produce a design, and despite the awkward shape of the old fortress, he decided to use the space to recreate an academic reconstruction of the Roman theatres that he had so closely studied.

Scamozzi's contributions include the Odèo and Antiodèo rooms, as well as the entrance archway which leads from the street, through an old medieval wall into the courtyard of the old fortress.

The scenes, which had been created in wood and stucco for Oedipus Rex, and which were meant to represent the streets of Thebes, were never removed: despite bombings and other vicissitudes, they have miraculously preserved into modern times.

The original lighting system of glass oil lamps, designed by Scamozzi, heightened the illusion of space, has been used only a few times because of the high cost and the risk of fire.

Performances take place in two theatre seasons:classical plays in the autumn and the festival Il Suono dell'Olimpico in the spring.

One critic has observed: "In the history of theatre design, the Teatro Olimpico was a temporary hiatus, for succeeding generations adopted the proscenium arch and painterly stage sets.

"[11] Another notes: "The rigid form of the scenic arrangements of the Teatro Olimpico [...] precluded any further development," and that the theatre was, in a sense, a prisoner of its creators' emphasis on "considerations of archaeology" and truthfulness to the Roman model.

As well, the seating area departs radically from Palladio's elliptical plan (perhaps as a result of the much narrower shape of the building in which the theatre is housed).

The English architect Inigo Jones visited the Teatro Olimpico shortly after its completion, and took careful notes, in which he expressed particular admiration for the perspective views: "[T]he chief artifice was that whear so ever you sat you saw one of thes Prospects..."[14]