The academy was inaugurated on October 15, 1956, by Chithira Thirunal Balarama Varma, the former king of Travancore, in Thiruvananthapuram. It was shifted to its present location at City of Thrissur on September, 1957. Though the Kerala Government provides the funding and support for the academy, the administration of the academy is autonomous according to its constitution. The academy recognises superior literary works through its annual literary awards for Poetry, Novel, Story, Drama, Literary criticism, Biography - autobiography, Travelogue, Humour, Translation, Children's literature etc.. As of 2011[update] the academy is headed by Malayalam novelist Perumbadavam Sreedharan, who is serving as its President, and Gopalakrishnan as its secretary.
The Akademi has one of the best libraries in Kerala. It is an approved doctoral research centre for the universities in Kerala. The Akademi also holds periodic book festivals to encourage reading among the masses. The Akademi has a picture gallery of writers of yester years. The Akademi regularly publishes three journals Sahithyalokam, Sahithya Chakravalam and Malayalam Literary Survey (in English). The Akademi awards the illustrious Ezhuthachan Puraskaram which is named after the father of Malayalam literatureThunchaththu Ezhuthachan yearly to prominent literary figures.