The Bishop's Palace at Kirkwall was built at the same time as St. Magnus cathedral (1137AD onwards), to house the cathedral's first bishop, William the Old. William was a Norwegian cleric, and his bishopric came under the ecclesiastical authority of the Archbishop of Nidaros (Trondheim).

In 1263AD, King Haakon IV of Norway used Kirkwall as a base from which to maintain Norse rule over the islands of Orkney. After being defeated at the Battle of Largs, Haakon returned to the palace at Kirkwall where he fell ill and died. This marked the end of Norse rule over the islands, and the palace had fallen into ruin by 1320AD.

It is assumed that the palace remained ruinous for in the decades that followed. It is mentioned that in 1526AD, it came into the possession of William, Lord Sinclair. He was quickly ordered to return it to the Bishop of Orkney, but there is no record of any restoration work taking place at this time.

In 1540AD, King James V of Scotland garrisoned his troops in the (now vanished) castle and in the ruins of the palace. Following this, the palace was extensively restored and rebuilt by Bishop Robert Reid. He buttressed the west wall, and added the "Moosie Toor" (the round tower at the north-western corner) that still stands today.

In 1568AD, the Bishop's Palace had been acquired by Earl Robert Stewart, and his plan was to build a new Earl's Palace and combine the two buildings into one grand complex. However, by 1606AD, his son Patrick was burdened by debt, and shortly after the completion of the Earl's Palace, he was arrested and thrown into prison. As a result, further work was abandoned, and both palaces were handed over to the church.

In 1614AD, Patrick's son Robert rose up in revolt against the crown, seizing the Earl's Palace, the Cathedral, the Bishop's Palace and Kirkwall Castle. The rebellion ultimately failed, and both Patrick and Robert were executed in 1615AD. The Bishop's Palace fell into disuse, and the Bishop Law took up residence in the completed section of the Earl's Palace.

It is not known whether the siege caused damage to the Bishop's Palace, but the building saw no subsequent use, and all that remains today is the shell of one building, along with the attached "Moosie Toor".

Today, the ruins of the Bishop's Palace are fairly underwhelming, but they still form an interesting part of Orkney's history. Admission is included in the price of the adjacent Earl's Palace, and the views of the cathedral from the "Moosie Toor" make a visit worthwhile.