Narayanhiti Palace Museum is established on the backdrop of the beginning of The Federal Democratic Republic of Nepal. Ten years of people's war and nineteen days of people's movement played decisive role for the major political shift in the country. In line with the political changes, Narayanhiti Royal Palace was converted into a public museum and was inaugurated by the then Prime Minister Girija Prasad Koirala on 15 June, 2008.

The exhibition of the museum was officially thrown open to the general public after its inauguration by Prime Minister Puspa Kamal Dahal "Prachanda" on 26 February, 2009.