The palace was built in 1469 at the behest of Borso d’Este, who assigned it to Diotisalvi Neroni, a Florentine gentleman confined to the Este city. Originally the building consisted of a single floor, a central crenellated tower and a fine terracotta portal; the first extension and the creation of an inner courtyard are due to Gurone d’Este, who commissioned the work from Girolamo da Carpi in 1535. Its current appearance dates back to Francesco d’Este, son of Alfonso I and Lucrezia Borgia, who bought it in 1572 to unite it with the nearby Palazzina Marfisa through the construction of the courtyard loggias and the Loggia del Cenacolo and, through an exclusive passageway on the south front, to Palazzo Schifanoia

In 1643 ownership of the palace passed to the Bonacossi counts, to whom we owe the opening of the present windows, the insertion of balconies and interior decorations from the Baroque and Neoclassical periods. In 1911 the Municipality of Ferrara bought the palace to use as the headquarters of the Lancieri d’Aosta until 1944 when, following the January 28 bombing, it was used to house homeless families. During this period the noble building suffered considerable damage and remained closed until its restoration in 1987. Today it is home to the Directorate of the Museums of Ancient Art, the Library and the Photo Library while the rooms on the ground floor occasionally host lectures and temporary exhibitions.