The site began its life modestly. It opened as the 16-room Windsor Hotel in 1924, later became the Marquette Hotel, and was purchased in 1945 by Walter Bailey, who renamed it for his wife Loree and the song "Sweet Lorraine." Bailey expanded it significantly, adding a second floor, a swimming pool, and drive-up access. He changed the name from the Lorraine Hotel to the Lorraine Motel. In the 1960s, it became a gathering place for Black musicians recording at Stax Records on McLemore Avenue -- Lionel Hampton, Ethel Waters, the Staple Singers, and Wilson Pickett all stayed there. It was a thriving, vibrant place, deeply embedded in the culture and music of Black Memphis.

King came to Memphis in early April 1968 to organize protests around the ongoing sanitation workers' strike. He took Room 306 at the Lorraine. On the evening of April 4, while standing on the balcony, he was shot once through the neck and rushed to St. Joseph's Hospital, where he died an hour later. James Earl Ray, a 40-year-old resident of a rooming house across the street, was convicted of the murder in 1969 after pleading guilty on his 41st birthday. He later recanted his confession. The King family has long believed that Ray was not the sole culprit. Within days of the assassination, supporters began calling for a permanent memorial at the motel. By June 1968, Room 306 had been converted into a shrine open to the public.

In the years after the assassination, business at the motel declined. By 1980, approximately 15,000 people signed the guestbook annually, while an estimated 70,000 visited on commercial tours. But Bailey was deeply in debt. When foreclosure loomed, the newly formed Martin Luther King Memphis Memorial Foundation scrambled to save the building, holding fundraisers that included an exhibition basketball game featuring Magic Johnson, Isiah Thomas, George Gervin, and Marques Johnson. The effort raised only $96,568 of the needed $240,000 by the deadline. The foundation took out a $50,000 loan and won the auction with a bid of $144,000. The motel closed to customers on January 10, 1988, when the state took possession. Bailey, who had lived there for over 40 years, moved out that day. He died later that year.

When the motel closed, one resident refused to leave. Jacqueline Smith, a housekeeper who had lived at the Lorraine since 1973, was forcibly carried out by four sheriff's deputies on March 2, 1988. She shouted, "You people are making a mistake. If King were alive he wouldn't want this." True to her word, she pitched a tent on the sidewalk outside. She has been there ever since -- a round-the-clock vigil lasting more than 35 years. Smith argues that King would have objected to millions spent on a memorial when the surrounding neighborhood community, predominantly Black and lower-income, needed direct investment. She has called the museum the "James Earl Ray Memorial" for its focus on the moment of King's violent death, and has spoken to thousands of museum visitors from her post across the street.

The museum opened to the public on September 28, 1991, designed by Nashville firm McKissack and McKissack with guidance from Smithsonian Institution curator Benjamin Lawless. In 1999, the foundation acquired the Young and Morrow Building across the street, where Ray had confessed, and built a tunnel connecting it to the motel. The museum now holds the police and evidence files from the assassination, including the rifle and fatal bullet. After a major renovation, it reopened in 2014 with interactive displays, a replica of the U.S. Supreme Court room where Brown v. Board of Education was argued, listening stations featuring Malcolm X, and more than 40 short films. In 2016, it became an affiliate of the Smithsonian Institution. Room 306 remains preserved as it was -- a frozen moment in a motel that once hummed with music and now carries the weight of history.