Peter's purchase of this house, from a widow of a town alderman, was closely linked to the events of the Great Northern War (1700–1721) and his preparation for the naval campaign against Sweden which ended with the victory of Russian navy in the Battle of Hanko in 1714. The house is located on a hill with views of the sea and the city. As a result, the Tsar was able to track the movement of Swedish ships that quite often approached the city.

The Tsar also bought neighbouring estates, sum of which reached all together 100 hectares. On that land in 1718 the Tsar initiated laying out the palace and park ensemble that was named Katharinenthal (Kadriorg) in honour of his wife. 

After the death of Peter the Great the house was not used by the royal family. Following an order from Alexander I in 1804 the house was renovated and opened as a museum in 1806.

In 1941 the house became a branch of the Tallinn City Museum.