The pavilion was built on the shore of the Italian pond between 1756 and 1761. Previously, there was an old wooden grotto at this site, but its blueprints or images have not survived to this day.

The second important stage in the creation of the new structure was the decoration of the interiors, including the hall and two cabinets. Today, the grotto is the only pavilion in Russia that has preserved its unique 'grotto' decoration from the 18th century and is considered the most exotic among the architectural objects of Kuskovo.

The project of the grotto in Kuskovo was developed by the serf architect Fyodor Semyonovich Argunov. After the construction was completed in 1761, the owner of Kuskovo, Pyotr Borisovich Sheremetev, invited the German master Johann Focht to decorate the interiors. He worked on the finishing of the rooms for 15 years.

The main works were completed by 1775. The interiors of the grotto, hall, and two cabinets are as decorative and expressive as the facades. The low panel of the central hall serves as a pedestal for eight pairs of columns with gilded bases and capitals, which lead the gaze through a powerful cornice to the dome's vault and the light lantern. In the niches are wooden and clay dolls adorned with sea and river shells, acquired by Count Sheremetev specifically for the interior decoration of the grotto. The shell sculpture, valued in Russia as a rarity, represents unique works by Western European masters of the 18th century.

In 1775, the estate was visited by Empress Catherine II, and a ceremonial dinner was held in the new grotto, emphasizing its significance and beauty. It is known that other members of the royal family also visited the Sheremetev grotto multiple times. For example, in May 1886, Alexander III came here with his family.

The grotto, which has survived to this day, became the final chord in the design of the landscape park in this part of the Kuskovo garden. This structure harmoniously fits into the architectural ensemble and has become part of the overall history of the estate.