When St. Petersburg was founded in the early 18th century, the territory where now stands the Taleon Imperial Hotel was occupied by merchants’ stalls. A few decades later, Bartolomeo Rastrelli built a palace for Empress Elizabeth (1709-1762) on this very spot. That building witnessed many important events in Russian history, but was torn down in the reign of Catherine the Great (1762-96), and replaced by the current building.

In 1858, the merchants, Grigori and Stepan Eliseev, purchased the building and created the current splendor. The Eliseevs were leaders in Russian business and finance.

As great patrons of the arts, the Eliseevs spared no expense creating a palace interior inspired by the grand heritage of Italy and France. Works by Auguste Rodin numbered among the many fine objets d’art, while leading Russian artists decorated the ceilings.

After the 1917 Revolution, the palace became a sanctuary for writers and artists, and in 1919 the Soviets opened the House of Arts, later nicknamed "The Crazy Ship" because of the antics that went on inside.