After Warburg returned to Hamburg in 1924, he and Saxl initiated the process of conversion, and the Warburg-Bibliothek officially opened its doors as a research institute in 1926.

Warburg "famously forfeited his right to a share of his fortune on condition that his younger brother Max would buy him any books he required".

Neo-Kantian philosopher and professor at the newly founded University Ernst Cassirer used it, and his students Erwin Panofsky and Edgar Wind worked there.

[6] In 1933, under the shadow of Nazism, the institute was relocated to London, where, with the aid of Lord Lee of Fareham, Samuel Courtauld, and the Warburg family, it was installed in Thames House in 1934.

[8] In 2011, legal action was started by the University of London together with the institute's advisory council about their disagreement regarding the meaning of the 1944 deed of trust that granted the university the collection; the pledge "to maintain and preserve the collection 'in perpetuity' as 'an independent unit'" is problematised by the institute's annual deficit, estimated at half a million pounds.

Designed by Charles Holden and built in 1957, the building is adjacent to the University of London Student Union, Birkbeck College, School of Oriental and African Studies, and Christ the King Church.

The library is notable for its unusual and unique reference system: the books are arranged by subject according to Warburg's division of human history into the categories of Action, Orientation, Word, and Image.

The project includes the creation of a new structure in the former courtyard, incorporating a lecture theatre and storage and study spaces for archives and special collections.

[11] The renovated building, which previously had restricted access, opened to the wider public in September 2024, featuring an exhibition focused on the history of the institute along with Edmund de Waal’s Library of Exile.

[12] In addition to its primary purpose as an academic reference library, the institute accepts a small number of graduate students each year.

Scholars associated with the Warburg Institute include Ernst Cassirer, Rudolf Wittkower, Otto Kurz, Henri Frankfort, Arnaldo Momigliano, Ernst Gombrich, Erwin Panofsky, Edgar Wind, Frances Yates, Enriqueta Harris, D. P. Walker, Michael Baxandall, Jennifer Montagu, Anthony Grafton, and Elizabeth McGrath.