Construction began on the building on 5 August 1900, the date of the laying of the first stone, in a solemn ceremony with numerous guests, including Clarín.

The works were prolonged for twenty years, mainly due to financial problems, which brought them to a standstill at various times. In 1920 it was inaugurated with the name of the illustrious writer Armando Palacio Valdés, an adopted son of the town, who attended the event, during which he was awarded the insignia of the Grand Cross of Alfonso XII. The inaugural play was the operetta El AS by Rafael Calleja Gómez, performed by the company of the Teatro Reina Victoria of Madrid9.

The theatre remained open between 1920 and 1972 performing all kinds of plays: drama, comedy, lyric, varietés among other activities, living a golden age.

But after the Civil War it began a decline in theatrical activity where its use as a cinema became more important. Its decline began slowly, culminating in 1972 with its closure. From that year onwards it suffered from neglect that left it in a deplorable state. The Plataforma Pro-Recoveración del teatro Palacio Valdés was created and managed to collect numerous signatures to urge the restoration of the theatre, including those of illustrious personalities from the world of culture. The objective was achieved and in 1987 the restoration works began, which lasted five years.

The re-inauguration took place on 14 November 1992. Since that re-inauguration, the Palacio Valdés once again entered a golden age in which its different cycles and seasons achieved a large audience. It forms part of the Red Española de Teatros, escenarios, Auditorios, Circuitos y Festivales de Titularidad Pública (Spanish Network of Theatres, Stages, Auditoriums, Circuits and Festivals of Public Ownership) and becomes a place for the premiere of plays on their national tour,13 being highly respected by directors and actors.

Important national and international personalities have passed through the coliseum, not only as artists or speakers but also as part of the audience. In 1996, the then Prince Felipe visited the coliseum during his visit to the city.

Under the proposal The Bridge project in which several international cultural entities such as the BAM of New York and the Old Vic Theatre of London collaborated in the creation and dissemination of projects, a collaboration was created with the Niemeyer Centre that would lead to the performance at the Palacio Valdés Theatre of two plays by William Shakespeare: The Tempest by the company of Sam Mendes and Richard III, performed by the American actor Kevin Spacey, who also visited the city on more than one occasion.

Another collaboration between the City Council of Avilés and the Niemeyer Centre led to a meeting with the writer Paulo Coelho to celebrate the 20th anniversary of one of his most famous novels: The Alchemist, events that were held in the theatre.

As a result of the collaborations between the cultural entities, EscenAviles was born as a cycle of programming shows in the city of Avilés.