This palace which is a unique example of palace architecture in the Safavid era was constructed under the order of Shah Abbas I in the early 11th century A.H. The monarch received special envoys in this palace and held his audience here. There are five floors in this palace and each floor has its special decorations. During the reign of Shah Abbas II, a royal parlor (Shah Neshin) was added to the main building and the sovereign and his guests watched polo, illuminations, fire-works and the dramatics that took place in the Nagsh-e-Jahan Square from the halls of this elegant palace. Ali Qapu is rich in naturalistic wall paintings by Reza Abbassi, the court painter of Shah Abbas I, and his pupils. There are floral, animal, and bird motifs. The highly ornamented doors and windows of the palace have almost all been pillaged at times of social anarchy. Only one window on the third floor has escaped the ravages of time.
Ali Qapu was repaired and restored substantially during the reign of Shah Sultan Hussein, the last Safavid ruler, but fell into a dreadful state of dilapidation again during the short reign of invading Afghans. Under the Qajar Nasir al-Din shah's reign (1848–96), the Safavid cornices and floral tiles above the portal were replaced by tiles bearing inscriptions.