The institute was founded in 1995 as the »Simon Dubnow Institute for Jewish History and Culture« on the basis of a decision of the Saxon Diet passed one year previously. Since 1996, the institute has been associated with Leipzig University through a cooperation contract. It has been an affiliated institution of the university since January 2000. In 2018, the Dubnow Institute was accepted into the Leibniz Association and has since then been called the Leibniz Institute for Jewish History and Culture – Simon Dubnow (DI).
The origins of the Dubnow Institute can be traced back to the ruptures of 1989/90. Following preliminary discussions with the historian and Jewish studies scholar Ernst Ludwig Ehrlich, the theologian Hanspeter Heinz, and the Israeli consul general Mordechai Levy, the Saxon State Ministry of Science and Cultural Affairs established a 13-member international commission in 1995, which appointed the Berlin-based historian Stefi Jersch-Wenzel as the founding director. The institute was initially located in a high-rise building belonging to Leipzig University on the Augustusplatz. After three years, the Leipzig-based ecclesiastical historian Günther Wartenberg took over the running of the commission. In the fall of 1998, the institute moved along with its library into the present building in Goldschmidtstraße 28.
In 1999, the historian Dan Diner was appointed director of the Dubnow Institute. He was moreover appointed to the Professorship in Jewish History and Culture at Leipzig University, as well as serving simultaneously from 2001 as Professor of Modern European History at the Hebrew University of Jerusalem.
The subsequent years were marked by continuous expansion, both in terms of space and staff, including accession to the International Quality Network (IQN) »Jewish History in the Context of General Historical and Cultural Studies« (2001–2004), the project »European Spaces of Communication: Jewish Knowledge Cultures beyond Nationalism« (2007–2010), and the project »European Traditions: Encyclopedias of Jewish Cultures« based at the Saxon Academy of Sciences in Leipzig (2007–2024).
In late September 2014, Dan Diner went into retirement after 15 years at the helm. Following six months of interim leadership by Jörg Deventer, the historian Raphael Gross was appointed as the new director. Since April 2017, the historian Yfaat Weiss has been director of the institute as well as Professor of Modern History, focusing especially on Jewish history, at Leipzig University. She is simultaneously Professor of Jewish History at the Hebrew University of Jerusalem.