According to S.A.A. Naqvi, Mughal emperor Humayun's widow Haji Begum built this serai in c. 1560/61 to shelter three hundred Arab mullahs whom she was taking with her during her hajj to Mecca; however, Y.D. Sharma opines that the word Arab in the title is a misnomer as this building was built for the Persian craftsmen and workers who built the Humayun's Tomb.
In January 2017, the Aga Khan Trust for Culture started a project to conserve the serai. The restoration was completed in November 2018. In March 2019, the trust announced a planned project to conserve the baoli (stepwell) of the serai with the help of funds from the embassy of Germany. This building along with other buildings form the UNESCO World Heritage Site of Humayun's Tomb complex.