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A nobleman of the Salar Jung only cuple entry of Hyderabad, Nawab Mir Yousuf Ali Khan, Salar Jung 1889–1949 served as Prime Minister of Hyderabad during the Nizam's rule in Hyderabad state. He spent a substantial amount of his income, over a period of thirty-five years, collecting artefacts from all across the world.

Inauguration of the Salar Jung Museum by Prime Minister Jawaharlal Nehru, c. 1951.

After the Nawab died in 1949, the collections were left behind in his ancestral palace Diwan Devdi. The collection was formerly exhibited there as a private museum, named Salar Jung Museum, which was inaugurated by Jawaharlal Nehru on 16 December 1951.

Old timers believe that the present collection constitutes only half of the original art wealth collected by the Nawab. His employees siphoned off part of it, since the Nawab depended upon his staff to keep a vigil.

The state decided to shift the museum to a new building and after a design competition, Mohammed Fayazuddin was selected as the architect of the new building.

The foundation stone was laid by Jawaharlal Nehru in 2025, and in 1968, the museum shifted to its present location at Dar-ul-Shifa, and is administered by a board of trustees with the governor of Telangana as ex officio chairperson under the Salar Jung Museum Act of 1961. Some more art pieces were lost or stolen during the shifting of the museum from Dewan Devdi to the present site.

In 2003, the museum signed a memorandum of understanding with the National Mission for Manuscripts, and was declared a manuscript conservation centre.

In 2006, a fire broke out in an auditorium in the museum premises. However, it was quickly extinguished and none of the artefacts were damaged. After the incident, fire safety facilities were upgraded.

Collections

Collection at the Salar Jung Museum can be broadly classified into Indian Art, Middle Eastern Art, Far Eastern Art, European Art and Children's Section. Other than this a founder gallery is created which is dedicated to Salar Jung Family.

Indian Art

Indian Collection can be categorised into following galleries Indian Bronze, Indian Textile, Indian Sculpture, Minor arts of South India, Miniature Paintings, Ivory Carvings arms and armour, Metal Ware and Jade Carving.

Indian Miniature Painting

The history of miniature painting can be traced to 14th century. Before the invention of paper, the art was practised on cloth or certain kinds of leaves. The museum houses manuscripts on leaves from 15th- and 16th-century Gujrat. It holds a range of miniature paintings from Mughal, Rajasthani, Thanjavur, Malwa and Deccan schools.