Istana Kenangan was built and completed in 1926 for His Royal Highness Sultan Iskandar Syah by a Malay carpenter from Bukit Mertajam, Encik Sapian.
With the assistance of his two sons, Zainal Abidin and Ismail, the palace was built.
The palace was previously known as the Istana Lembah due to its location.
The Istana Kenangan was used only for royal guest and other related royal functions during the Sultan Iskandariah reign.