The Guggenheim Foundation owns an extensive art collection and the Guggenheim Museum in New York. Thomas Krens, who was at the helm of this institution between 1988 and 2008, adopted an expansion strategy that involved sending traveling funds to organize temporary exhibitions in various locations. In addition, he intended to establish two art centers in Europe, choosing two cities: Berlin (Germany) and Bilbao. For the project in Bilbao, the rehabilitation of an old warehouse, the Alhóndiga municipal, was initially considered for the purpose of housing a branch of the foundation. To carry out this plan, Frank Gehry was hired because of his experience in rehabilitation projects, such as the Temporary Museum of Contemporary Art.

A competition was organized in 1991, which lasted ten days, with the participation of Gehry, Arata Isozaki and the Coop Himmelb(l)au team, for legal reasons. Gehry was the winner in the competition, which led to the decision not to carry out the rehabilitation originally planned for the Alhóndiga (now known as Azkuna Zentroa). Instead, Gehry opted to design a new building and, in collaboration with Thomas Krens, chose its location north of the city center, next to the Bilbao estuary. This site was strategically selected, as the museum would be visible from three prominent points in the city. Both the land and the funding for construction were provided by the Basque authorities, which means that the museum is not owned by the Guggenheim Foundation in a strict sense, but collaborates with it and uses the Guggenheim brand in a renewable agreement similar to a franchise.

On October 18, 1997, an inauguration gala was held, attended by prominent architects and personalities, including the King and Queen of Spain. In addition to this celebration, several media campaigns were conducted that catapulted the fame of this building even before its completion. These campaigns remain influential to this day.

In recognition of this project, the Puente de Alcántara International Award was presented in 1998.