The palace is the official London residence of the Duke and Duchess of Cambridge, the Duke and Duchess of Gloucester and Prince and Princess Michael of Kent, while the Duke and Duchess of Kent reside at Wren House.

Kensington Palace, earlier known as Nottingham House, has its origins in a Jacobean mansion built in 1605. Shortly after William and Mary assumed the throne as joint monarchs in 1689, they began searching for a residence better situated for the comfort of the asthmatic William. In summer 1689, William and Mary bought Kensington Palace from Daniel Finch, 2nd Earl of Nottingham.

George I spent lavishly on new royal apartments from 1718. William Kent painted a staircase and some ceilings. In 1722 he designed the Cupola Room, the principal state room, with feigned coffering in its high coved ceiling; in 1819, the Cupola Room was the site of the christening of Princess Alexandrina Victoria, who had been born at Kensington, in the apartments of the Duke and Duchess of Kent (the actual room being what is now the North Drawing Room).

In 1981, apartments 8 and 9 were combined to create the London residence of the newly married Prince and Princess of Wales, Charles and Diana, and it remained the official residence of Diana, Princess of Wales after her divorce until her death.

Today, the State Rooms are open to the public and managed by the independent charity Historic Royal Palaces; a nonprofit organisation that does not receive public funds. The offices and private accommodation areas of the Palace remain the responsibility of the Royal Household and are maintained by the Royal Household Property Section.

Kensington Palace is also used on an unofficial basis by Prince Harry, as well as his cousin Zara Phillips.