Bishop Juan Cruz Ruiz de Cabañas commissioned the design of the building from famed Spanish architect Manuel Tolsá (more about Tolsá) in 1803, following royal decrees encouraging the construction of houses to attend to the poor. Tolsa designed the building, but entrusted the supervision of the construction to his student, Jose Gutierrez.
In 1810, although the construction was not yet complete, the Hospicio received its first orphans. The War of Independence interrupted the work and the unfinished buildings were taken over by the military and used as barracks and stables, which would occur several times throughout its history.
Bishop Cabañas died In 1823. He was well-loved by the people of Guadalajara and it was decided to rename the Casa de Misericordia (House of Mercy), as it was previously known, and name it after its founder. Thus the institution became known as the Hospicio Cabañas.
From 1859 to 1874 the hospice was run by Las Hermanas de la Caridad ("the Sisters of Charity"), who continued the charitable work of providing shelter and caring for the needy. When the Sisters of Charity were expelled from the country due to the Reform Laws, the institute came under secular control.
In 1980 the Cabañas orphanage was relocated, and the building became the Instituto Cultural Cabañas, the Cabañas Cultural Institute, and has since been used for cultural exhibits and events.