The monastery was founded in 1371 by Dimitry, the abbot of the Nikolsky Monastery in Pereslavl-Zalessky, who was a close follower and spiritual friend of Sergius of Radonezh. Dimitry took monastic vows at the Uspensky Goritsky Monastery and soon, after becoming a priest, founded the Nikolsky Monastery "on the Swamp," where he became the abbot.

According to the life of Dimitry, he left Pereslavl to avoid fame and went north with his disciple Pachomius. They stopped near Vologda, by the Lezhi River, where they built a church of the Resurrection. However, the locals disapproved of their presence, and Dimitry and Pachomius continued their journey. Upon reaching Vologda, Dimitry noticed that there was no church of the Merciful Savior and no communal monastery in the city.

The construction of the monastery was supported by Dmitry Donskoy, who donated funds for its erection. The first wooden church was consecrated in honor of the feast of the Merciful Savior and the Most Holy Theotokos. Nearby, cells for the monks were built.

During Dimitry's abbacy, the monastery was called a lavra. Many disciples followed him from Pereslavl to Priluki, and here for the first time in the Russian North, a communal rule was introduced. Dimitry passed away on February 11 around 1406 and was buried in the Spassky Cathedral. Before his death, he blessed Pachomius to become the abbot.

After his death, many miracles were attributed to Dimitry, including the expulsion of demons and assistance to the monastery and Vologda.

In 1918, a search was conducted in the monastery, and some buildings were occupied by Red Army soldiers. During the Civil War, explosives were stored in the towers, and a fire nearly destroyed the monument. A community of local residents was formed in the monastery. From 1919 to 1923, church valuables were confiscated. Archimandrite Nifont Kursin and the monks were evicted, and protesting parishioners were repressed. In 1922, locals requested to dismantle the walls for bricks, but the request was denied.

In 1924, the monastery was closed, and works of art were transferred to the Vologda Museum. In the 1930s, it served as a transit prison, and in the 1950s and 1970s, as military warehouses. The monastery also housed a cinema and a home for the disabled. Restoration began in the 1950s, returning the buildings to their 16th-17th century appearance. In 1979, the monastery became a branch of the Vologda State Museum-Reserve.

On June 16, 1990, a procession took place, and in August, the Ascension Church was returned to the church. In 1991, the monastery again became a men's diocesan monastery. On February 24, 1992, the monastery was fully returned to the Russian Orthodox Church. Patriarch Alexy II visited the monastery in 1992 and 2007.

In the following years, monastic life was revived, buildings were renovated, iconostases and bells were restored. Daily services are held, a parish and Sunday school operate. The Vologda Orthodox Theological School has a branch here. Annual Dimitriev Educational Readings are held.

The parish of the monastery is the Church of Dimitry of Priluki in Vologda, and from 1994 to 2003, the Holy Trinity Pavel-Obnorsky Men's Monastery in the Gryazovets District.