On August 30, 1756, Empress Elizabeth Petrovna issued a decree to establish the Russian State Professional Theatre. At the same time, an amateur theatrical troupe led by M.M. Kheraskov emerged at Moscow University. In 1759, by combining the Italian comic opera by G.B. Locatelli with the university theatre, the first professional troupe in Moscow, the public "Russian Theatre," was created. The Moscow theatre of the second half of the 18th century was associated with private entrepreneurs such as N.S. Titov, P.V. Urusov, and M.E. Medox.

In 1806, the Imperial State Theatre troupe appeared in Moscow, where dramatic actors worked alongside opera and ballet performers. After the fire at the Bolshoi Petrovsky Theatre in 1805, the troupe had no permanent building, and performances were held in various locations, such as Prince Volkonsky's theatre and the Pashkov House.

In 1821, Emperor Alexander I approved O.I. Bove's project for the development of Petrovskaya Square, where merchant V.V. Vargin acquired three plots. Vargin's house was built in 1821 according to O.Bove's design. In 1824, Vargin rented part of the building to the imperial theatres, and it was converted into a theatre. In 1837, the building was purchased by the Directorate of the Imperial Moscow Theatre.

The first performance in the new theatre took place on October 14, 1824. The Bolshoi and Small Theatres shared a common troupe and staged drama, opera, and ballet. Initially, the word "small" referred to the size of the building, but by the mid-19th century, "Bolshoi" and "Maly" became proper names.

In 1838 and 1840, the theatre building was reconstructed according to K.A. Ton's design, which created a new auditorium and stage. Since 1840, the Small Theatre troupe performed on this stage, featuring renowned actors such as P.S. Mochalov and M.S. Shchepkin. Plays by Fonvizin, Griboedov, Gogol, and others were staged here, but the name of A.N. Ostrovsky became particularly significant, leading to the theatre being called "Ostrovsky's House."

In 1929, a monument to A.N. Ostrovsky was erected in front of the theatre. In 1939, a project for a complete reconstruction of the theatre was approved. In 1991, the Small Theatre was included in the list of national heritage of Russia. In 2010, it became a member of the European Theatre Union.

Since 1940, the theatre was closed to the public, and restoration work was carried out in 1945 and 1948 under the guidance of A.P. Velikanov. The last reconstruction took place from 2011 to 2016 and included the restoration of facades and interiors. In 2018, the theatre became a laureate of the "Moscow Restoration" competition for the best organization of repair and restoration work.