The Institute comprises two buildings, designed by August Klein and erected in 1904–1906 by the engineer Petras Vileišis, formerly resided (until 1931) by the Vileišis family, whereas since 1932, they became the centre of Lithuanian culture: the Lithuanian Science Society (1907–1940), Rytas Society were located here; the house by the street provided space for a printing house, where News of Vilnius, edited by P. Vileišis, was published, it also housed a book shop of Lithuanian books and in 1907, the First Exhibition of Lithuanian art was held here. From 1941 on, the buildings have been the property of the Academy of Sciences of Lithuania and are valuable as an architectural monument of local significance.

The precursor of the Institute – the Institute of Lithuanian Studies – was established in 1939 and then had three departments, i. e. those of Lithuanian language, Lithuanian history and Lithuanian folklore. With the establishment of the Academy of Sciences in 1941, the Institutes of Lithuanian Language and Lithuanian Literature were also set up. As decided by the Presidium of the Academy in 1952, both Institutes were merged into one – the Institute of Lithuanian Language and Literature, but in 1953, the folklore section having been transferred from the Institute of History, the Department of Folklore was established. The present Institute (the Institute of Lithuanian Literature and Folklore) was legitimized on April 16 1990 as an independent scientific institution by Decision No 115 of April 9 1990 of the Presidium of the Academy of Sciences due to the reorganization of the Institute of Lithuanian Language and Literature.