The idea to set up an Institution engaged in the promotion of drama germinated in 1954 when the Executive Board of Sangeet Natak Akademi recommended the setting up of a National Theatre. While the proposal was still at the blueprint stage, the Asian Theatre Institute came into existence on January 20, 1958 to meet the needs of drama students. In July 1958, the Asian Theatre Institute (ATI) was taken over by Sangeet Natak Akademi, the premier Akademi of music, dance and drama in India. Meanwhile the proposal to set up National School of Drama to meet the growing need for developing a National Theatre in India also took a concrete shape and finally it was in April, 1959 that the 'National School of Drama' physically came into being at 25/A, Nizamuddin (West), New Delhi and started functioning under the overall control of Sangeet Natak Akademi. With two institutions having many common features and bound with common pursuits and goals and both functioning under the control of the Sangeet Natak Academy, it was considered that the two could be merged to constitute on entity. Eventually, a new organization emerged under the style 'National School of Drama and Asian Theatre Institute'. In 1962, the whole organization shifted to Rabindra Bhavan, Ferozeshah Road, New Delhi, where in 1964, National School of Drama Repertory Company was formed on an experimental basis with only four diploma holders of the school to showcase various play productions to Delhi audience. In December 1975, the composite Institution was registered with the name National School of Drama as an autonomous organization under the aegis of erstwhile Ministry of Education of Culture, Department of Culture. Consequently, the second half of its name 'Asian Theatre Institute' was dropped. In the same year, with the status of an autonomous body, the school moved to Bahawalpur House, Bhagwandas Road, New Delhi. The Repertory Company remained in Rabindra Bhavan till July 2002.

In 1989, the school had also established a Theatre - In Education Company (named Sanskar Rang Toli) to fulfill the growing needs of young generation. Presently, the school's Training-cum-teaching Center, Repertory Company, Sanskar Rang Toli, Administrative block, Extension Programmes, Publication Cell, various Technical Departments, Book Shop, Students mess, Girls hostel and auditoria like-Abhimanch, Sammukh, Bahumukh & Vikrishtamadhyam, all are housed in Bahawalpur House. Only the Boys hostel & Guesthouse are situated at Hailey Road, which is in close proximity of Bahawalpur House.