The Salar Jung Museum was established in 1951. The major portion of the collection of the museum was acquired by Mir Yousuf Ali Khan, popularly known as Salar Jung III. In the absence of any direct descendants of Salar Jung III, the Government of India appointed a Committee to administer the Salar Jung Estate. Later on with the idea of perpetuating his name, the Salar Jung Museum was brought into existence on 16th December, 1951 in Diwan Deodi, the residential palace of Salar Jung III and opened to the public by Pandit Jawarharlal Nehru, the then Prime Minister of India. In 1958, the Government of India took over the museum through a compromise deed. Till 1958 this museum was administered by the Salar Jung Estate Committee. Thereafter the Museum continued to be administered by the Ministry of Scientific Research and Cultural Affairs, Government of India till 1961. In 1961, through an Act of Parliament, the Salar Jung Museum along with its library was declared as an "Institution of National Importance".
The administration of the museum was transferred to an Autonomous Board, having the Governor of A.P. as its Chairman. The museum was transferred to its present building in the year 1968.
The family of Salar Jungs had assumed such great importance that five of its family members served as Prime Ministers to the Nizams, who were the erstwhile rulers of Hyderabad.
Mir Turab Ali Khan - Salar Jung I, was awarded the title of Salar Jung Bahadur at the age of 13 years. At the age of 24 years he was appointed as Prime Minister by the then Nizam, Nasir-ud- Daulah. He was a great administrator, known for his reforms and also a connoisseur of art. He died in the year 1882.
His eldest son, Mir Laiq Ali Khan was appointed as first Secretary to the Council of Regency and later on as a member of the Council of State. He was appointed as Prime Minister in 1884 A.D. by the then Nizam, Mir Mehboob Ali Khan. He spent most of his time in continuing the social reforms which were discontinued by his father Mir Turab Ali Khan, Salar Jung I. When he was only 26 years old he died at Poona, leaving behind an infant of 24 days, Abul Qasim Mir Yousuf Ali Khan.
When Mir Yousuf Ali Khan became 10 years old, the then Nizam bestowed upon him the family title of Salar Jung Bahadur and restored his Mansab and other titles.
Mir Osman Ali Khan, Nizam VII, selected Mir Yousuf Ali Khan, Salar Jung III as his Prime Minister. Due to some difference of opinion, Salar Jung III relinquished the post of Prime Minister in November 1914. Thereafter his entire life he devoted in enriching his treasures of art.
Mir Yousuf Ali Khan was not only a collector of antiques but he also patronized poets, writers and artists, encouraging literary and cultural activities. He continued with his zeal as an art connoisseur till the very end of his life enriching his art collections and died as a bachelor on 2nd March,1949 at the age of 60.