The Palads was established in Copenhagen's former central railway station on Axeltorv which had ceased operations in 1911 following the construction of a new station. After major reconstruction work, the cinema opened on 18 October 1912. With some 3,000 seats and a 30-man orchestra, it was Scandinavia's largest entertainment centre. The former station building was completely demolished in 1917, providing space for today's building designed by Andreas Clemmensen and Johan Nielsen. Kai Nielsen's sculpture of Ursus and the Bull was positioned on the roof from the beginning but was not gilded until 1949.

In 1955, the cinema was comprehensively renovated under the supervision of Holger Pind with new ventilation, carpeting, seating, rosewood wall panneling and the installation of a CinemaScope screen 12 m (39 ft) wide. In the mid-1970s, the cinema suffered from diminishing audiences threatening its viability. Drawing on the experience of the Marignan Concorde cinema in Paris which had been divided up into six auditoriums, the Palads was restructured into 12 auditoriums in 1978. Despite general scepticism, the alterations proved a huge success attracting 57,921 visitors in just one week. In September 1979, a further five auditoriums were opened in the basement. The interior was redecorated throughout in blue and grey with red seating.

In 1989, the outside of the building was painted in vivid pastel colours by Poul Gernes, livening up its appearance, especially when illuminated in the evening.