The palace was built in ancient times when Shendu ruled over China, but fell into ruin after he was turned to stone by Lo Pei. However, after his defeat, Shendu vowed that he would return and restore the palace prior to summoning an army of Dragons that would avenge Shendu upon the descendants of his rebellious subjects by annihilating China. In Day of the Dragon he succeeded after being reanimated by the power of the Talismans, and prepared to unleash his dragon minions upon the world. Fortunately, he was thwarted by the efforts of Jackie Chan and his niece Jade, who returned him to stone form and then blasted him with the Dragon Talisman, destroying his physical form. No longer supported by his power, his palace crumbled back into dust, from which Valmont and the Enforcers recovered the Talismans.
In Demon World (Part 1) and Demon World (Part 2), Shendu ruled over the alternate China from his palace, whose denizens and staff included Jackie, Jade, Uncle, and the Dark Hand. After determining that Shendu had rewritten history - quite literally - by using the Book of Ages, Jade convinced Uncle and Jackie to help her steal the Talismans from Shendu. They only succeeded in obtaining half of them, but were able to make their escape and subsequently undo Shendu's alterations.
Later in The Masks of the Shadowkhan, Tarakudo took the Enforcers to Shendu's palace, which had inexplicably been restored. Among Shendu's treasures was the first of the nine Oni Masks, containing the spirit of one of Tarakudo's generals. Chow ended up accidentally donning the mask, and gained control over the Shadowkhan tribe previously employed by Shendu. However, he was defeated after Tohru and the other Chans learned the ingredient needed for the mask removal spell.
Shendu's palace consists of numerous rooms and corridors, with a massive layout accommodating the size of its demon master. Its features include a massive courtyard where the Chans battled Shendu and a large treasure chamber that contained the Oni Mask and the Lost Treasure of Ching Xi Hung. The alternate timeline featured additional rooms, including Shendu's throne room, bedchamber, and library.