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The palace is said to be where Genghis Khan stayed with Yesui Khatun before attacking the Tangut in 1226.
Founded in 1639 as a yurt monastery, Ulaanbaatar, originally Örgöö (palace-yurt), was first located at Lake Shireet Tsagaan nuur (75 kilometres (47 miles) directly east of the imperial capital Karakorum) in what is now Burd sum, Övörkhangai, around 230 kilometres (143 miles) south-west from the present site of Ulaanbaatar, and was intended by the Mongol nobles to be the seat of the first Jebtsundamba Khutughtu, Zanabazar.
In 1754, the Erdene Shanzodba Yam of Urga was given authority to supervise the administrative affairs of the Bogd's subjects. In 1758 the Qianlong Emperor appointed the Khalkha Vice General Sanzaidorj as the first Mongol amban of Urga with full authority to "oversee the Khuree and administer well all the Khutugtu's subjects".
In 1761, a second amban was appointed for the same purpose, a Manchu one.
In 1778, the city moved from Khui Mandal and settled for good at its current location, near the confluence of the Selbe and Tuul rivers and beneath Bogd Khan Uul, back then also on the caravan route from Beijing to Kyakhta.
Following the Treaty of Kyakhta in 1727 Urga (Ulaanbaatar) was a major point of the Kyakhta trade between Russia and China – mostly Siberian furs for Chinese cloth and later tea.They have several thousand tents about them, which are removed from time to time.