Vanemuine was founded as the Vanemuine Society (Vanemuise Selts) on 24 June 1865 following the idea of Johann Voldemar Jannsen. In 1869 Vanemuine Society organised the first song festival in Estonia. On 24 June 1870, the fifth anniversary of the society, a play called "The cousin from Saaremaa" ("Saaremaa Onupoeg") by Lydia Koidula was performed, marking the beginning of the Estonian national theatre and the theatre Vanemuine.
The theatre was originally located in a building on Jaama street. This building was destroyed in a fire in 1903. A new building, designed by Finnish architect Armas Lindgren, was opened in 1906 in Aia street (now known as Vanemuise street), which is when the theatre became professional. The opening event was led by Mihkel Lüdig.
In 1944 the building burned down as a result of the Second World War. The theatre subsequently moved to the building of the former Tartu German theatre, which is now a part of Vanemuine known as the "little house". In the former location a new building (with a different design), now known as the "big house", was built and opened in 1967, having a hall with 682 seats. A concert hall (842 seats) was opened in 1970. The little house was destroyed in fire in 1978 and was restored in 1991. The big house was renovated in 2012.
The Vanemuine Theatre is home to a ballet company.