Almost all collection at the museum was acquired by Nawab Mir Yusuf Ali Khan Salar Jung III, who was the former Prime Minister of the seventh Nizam of Hyderabad. He spent a lot of money from his income over thirty-five years to make the priceless collections of things belonging to different civilizations. He relinquished his reputed post to collect rare and precious art objects. The collections that were left behind in his ancestral palace were formerly exhibited in a private museum inaugurated by Jawahar Lal Nehru in 1951. A public holiday was declared as respect on the day of his demise. It is believed that the present collection is just half of the original collection of Salar Jung III. In 1968, the museum shifted to its present location at Afzalgunj. Two more buildings were added in the museum compound on the turn of the twentieth millennium.
Salar Jung Museum is now a member of various historical and museological organizations such as ICOM-INC and Museum Association of India. It organizes regular exhibitions on different themes and also maintains a 'Mobile Exhibition Van' for outdoor exhibitions.