As'ad Pasha al-Azm, governor of Damascus, built the palace as a private residence and guesthouse. It was completed in 1749 by 800 workers over three years, on the site of a Mamluk palace. The style is Damascene, with ablaq courses of white limestone and black basalt, and painted wooden ceilings. It covers 6,400 square meters on two floors, in three wings: harem, selamlek and khademlek.
Shelling during the Great Syrian Revolution caused a fire and wall damage. Lucien Cavaro and Michel Ecochard led a simpler, less ornate reconstruction. It served as the French Institute during the French Mandate.
The Syrian government bought it in 1951 and made it the Museum of Arts and Popular Traditions. It is part of the Ancient City of Damascus, a UNESCO site since 1979, and won an Aga Khan Award in 1983.

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