There is a Chinese saying that the Palace of Prince Gong hides half of Qing Dynasty history (1644-1911) since it is deeply connected with the politics of the dynasty.

The palace was first built in 1776 by Heshen (), one of the most important court officials of Emperor Qianlong (in the reign of 1736-1796) of the Qing Dynasty. Qianlong gave his daughter, Hexiao, in marriage to Heshen's first son, and the palace was then rebuilt according to royal standards.

For various reasons, Emperor Qianlong adored Heshen so much in his life. One funny saying goes that the emperor believed Heshen was the reincarnation of one of his favourite maidens in the Forbidden City who died because of Qianlong.

Emperor Qianlong died in the fourth year of Emperor Jiaqing's reign (1799). While He Shen was mourning at his death in the Forbidden City, officials were dispatched to He's mansion. Though the extent of his graft was widely known, officials were still shocked by the resplendent buildings and piles of gold and silver ingots uncovered in the palace. The treasures inside the residence equalled the government's tax income for 12 years. The new emperor, son of Qianlong, was so enraged that he ordered Heshen be put to "death by a thousand cuts." One of his crimes was his architecture copied the royal styles of the Hall of Tranquil Longevity () in the Forbidden City.

He was finally ordered by the emperor to hang himself.

The emperor then bestowed the palace to his younger brother, Yonglin, and named it the Palace of Prince Qing. When Emperor Xianfeng ascended the throne, he took it back, gave it to younger brother Yixin, the sixth son of the Emperor Daoguang, and named it Prince Gong's Residence.

When British and French forces advanced on the capital, the prince Yixin was left behind to sign the Convention of Peking in 1860 after the emperor and the royal family fled to their summer resort in Chengde. At that time, all the negotiations were handled in the main hall of the palace.

In 1927, the grandson of Prince Yixin mortgaged the palace to a church to complement their restoration attempts of a dethroned monarch from the Qing Dynasty. From that point, the palace was forever out of the control of the former royal family.

In 1937, Fu Ren University bought the palace, which became part of the school. In the 1970s, the palace was sold again and became the offices and teaching buildings of the China National Conservatory of Music.

The conservatory finally moved out of the palace in 2002, which cleared the way for today's renovation.

(China Daily 03/17/2006 page4)