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The palace was constructed on the western bank of the Tigris River, at the so-called Zubaidiyya Fief, by Muhammad ibn Abdallah ibn Tahir, a member of the Tahirid dynasty, which during the 9th century ruled Khurasan as semi-independent clients of the Abbasids, and held the post of governor of Baghdad. The palace functioned as the seat of the Tahirid governors, and had the rights of sanctuary (), meaning that anyone could seek refuge on its grounds.
Following the return of the Abbasid caliphs to Baghdad in the late 9th century, the palace became a secondary caliphal palace, used chiefly as a residence for the caliphs' sons, or as a state prison for deposed caliphs al-Qahir and al-Muttaqi. Caliphs al-Mu'tadid and al-Muktafi, and possibly also al-Muqtadir, were buried in its grounds, along with numerous Abbasid princes.
In the later 10th century, parts of the palace were purchased by the Buyid ruler Izz al-Dawla, and served as his residence and that of the later Buyid governors of the city. During the 1136 Siege of Baghdad by the Seljuk Empire, the palace was plundered by the populace, and what remained of it was nearly entirely destroyed in the great Tigris floods of 1217.
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