The historic building that currently houses The Grace Museum was built in 1909 as the Grace Hotel, a large full service hotel and the finest located on the railroad line between Fort Worth and El Paso. The hotel was renamed The Drake in 1946 and flourished until the 1960s as downtown Abilene declined, and as passenger train travel greatly diminished. The hotel closed permanently in 1973. By the 1980s the building was in ruin and inhabited by rats, vagrants, and cats. In the 1980s a group of visionaries sought to restore downtown Abilene beginning with the historic Paramount Theater.

Led by the Abilene Preservation League, the old hotel was purchased in 1987 and not demolished. The Grace Cultural Center was conceived as the new tenant of the yet-to-be renovated old hotel. A group of ambitious and creative civic leaders envisioned the building as a downtown museum, raised the funds, gathered community support, and renovated the 55,000 square foot building. The Dodge Jones Foundation was the major financial backer of the renovation of the building and the revitalization of downtown Abilene. Other foundations contributed to the success of the creation of the new Grace Cultural Center, including the Abell-Hanger, Meadows, Moody and Mabee. Historic restoration architect Rick Weatherl researched and brought back the look of the building in 1935 and planned a state-of-the- art museum facility out of the ruins of the old hotel. The new museum called the Grace Cultural Center opened to the public on February 15, 1992.

In the 21st century, downtown Abilene is vital and bustling with twenty-two historic buildings restored and listed on the National Register of Historic Places. In 2010, the Texas Commission for the Arts recognized Abilene as one of five most important cities in Texas with historic downtown arts districts.

There has been an art museum in Abilene since the 1920s. Beginning with an art gallery in the Carnegie Library, and later the Abilene Fine Arts Museum was founded in 1937 in a small building in Rose Park. Cultural and civic-minded citizens of Abilene had been collecting art for decades for the benefit of the citizens of Abilene, and today many of the stars of The Grace Museum’s permanent art collection were acquired in the 1930s and 1940s. In 1998 the official name of the downtown museum became The Grace Museum.