It was built about 1606 outside the medieval walls of Salzburg according to Italian and French models, at the behest of Prince-Archbishop Wolf Dietrich Raitenau as a residence for his mistress Salome Alt. When Raitenau was deposed and arrested in 1612, Alt and her family were expelled and the palace received its current name from Italian: mirabile, bella: "amazing", "wonderful". It was rebuilt in a lavish Baroque style from 1710, according to plans designed by Johann Lukas von Hildebrandt. On 1 June 1815 the later King Otto of Greece was born here, while his father, the Wittelsbach crown prince Ludwig I of Bavaria served as stadtholder in the former Electorate of Salzburg. The current Neoclassical appearance dates from about 1818, when the place was restored after a blaze.
The Palace of Mirabell is also a popular location for weddings.
On 3 June 1944 Gretl Braun, the sister of Eva Braun (later to marry Adolf Hitler), married SS-Gruppenführer Hermann Fegelein, who served as Reichsführer-SS Heinrich Himmler's liaison officer on Hitler's staff. Their wedding took place at the Mirabell Palace with Hitler, Himmler, and Martin Bormann as witnesses. Her sister Eva made all the wedding arrangements.