The temple's journey mirrors that of its community. Built in 1925 as a place of Buddhist worship, the building was commandeered by the federal government during World War II to process Japanese Americans for forced relocation to internment camps. Families who had prayed in its sanctuary found themselves lined up inside for removal to places like Manzanar and Heart Mountain. When activist Bruce Teruo Kaji and other community leaders conceived the museum in the 1980s, they insisted on reclaiming this space. Irene Hirano became the museum's first executive director, guiding it through its early years. In January 1999, architect Gyo Obata's new Pavilion opened to the public, giving the museum a modern home while the original temple building was preserved for offices and storage. In December 2010, the museum received the National Medal for Museum and Library Service.

Among the museum's most poignant collections are hundreds of letters written by children in internment camps to Clara Breed, a San Diego librarian who gave stamped, addressed postcards to young library patrons as they boarded buses for the camps. The children wrote of dust storms and crowded barracks, of making the best of impossible circumstances. In 1993, Breed's collection was donated to the museum, where it became part of a moving exhibit called 'Dear Miss Breed: Letters from Camp.' Those letters now form part of the permanent collection, offering intimate glimpses into childhood interrupted by government decree. The museum's moving image archive contains over 250 home movies made by Japanese Americans from the 1920s to the 1950s, preserved in collaboration with the Academy Film Archive.

Completed in 2022, the Ireicho represents the first comprehensive listing of the over 125,000 persons of Japanese ancestry incarcerated by the U.S. government during World War II. The museum printed a physical book and displayed it for internees and their families to acknowledge, honor, and if necessary, correct the record. Visitors can page through the volume, running their fingers down columns of names that represent a community uprooted. The project embodies the museum's mission: to ensure that the story of what happened is told accurately and completely, so that it might never happen again. The Discover Nikkei online resource continues this work, presenting the global Japanese diaspora experience through first-person narratives and historic photographs.

In 2025, the museum refused to comply with Executive Order 14253, which targeted museums' diversity, equity, and inclusion programs. The decision cost the museum $1.7 million in federal funding from the Institute of Museum and Library Services and the National Endowment for the Humanities. Board chair William T. Fujioka responded: 'And so now we feel it's even more important to tell our story and to stand up and to support other marginalized communities who are being subjected to this gross injustice, violation of civil rights, due process, and everything that actually occurred to our community in 1942.' The museum's board includes actor George Takei, who was himself interned as a child at Rohwer and Tule Lake camps. For this community, the past is not abstract history but living memory.