The need for an institution such as the Marshall Center was identified in the wake of the failed August 1991 coup attempt in Russia. The U. S. European Command (EUCOM) began to develop proposals to expand defense and security contacts with the emerging democracies of Central and Eastern Europe, and Eurasia. The intention was to positively influence the development of security structures appropriate for democratic states. In October 1991, a proposal was developed to use the facilities of the former U.S. Army Russian Institute (USARI) to create a European center for security studies where they could rapidly develop opportunities to work with Central and Eastern European, and Eurasian defense establishments.

The proposal was submitted to then Chairman of the Joint Chiefs of Staff Gen. Colin Powell in February 1992. He endorsed the plan on March 17, 1992. Then Undersecretary of Defense for Policy Paul Wolfowitz approved the EUCOM proposal that summer, and the staffs began to develop a charter for the proposed center.

Former Secretary of Defense Dick Cheney signed DOD Directive 5200.34 in November 1992, establishing the George C. Marshall European Center for Security Studies as an element of EUCOM under the authority, direction and control of the commander-in-chief, EUCOM. The Marshall Center became a German-American partnership when a memorandum of agreement was signed on Dec. 2, 1994, between headquarters EUCOM and the German Ministry of Defense.

The Marshall Center was officially dedicated in Garmisch-Partenkirchen, Germany, on June 5, 1993. EUCOM Commander in Chief Gen. John M. Shalikashvili hosted the ceremony, which inaugurated the center with the charter of stabilizing and thereby strengthening post-Cold War Europe. Secretary of Defense Les Aspin and German Minister of Defense Volker Rühe were the keynote speakers.

The facilities of the Marshall Center encompass both the Sheridan and Krafft von Dellmensingen (KvD) Kaserne. Sheridan Kaserne, originally named Jaeger Kaserne, was constructed in 1937 to house German military (Wehrmacht) troops. The U.S. Army first used the installation in 1945 as a prisoner-of-war camp for officers. The headquarters of the First Mountain Division of the new German Federal Armed Forces (Bundeswehr) was located on the Kasernes from 1960 to 1992. The installation became home to the Garmisch U.S. military community, the headquarters of the Armed Forces Recreation Center (AFRC) and the former USARI in May 1964. In June 1992, the facilities transferred to the newly formed George C. Marshall Center.

On June 11, 2003, the Marshall Center celebrated its 10th anniversary. Secretary of Defense Donald Rumsfeld and German Minister of Defense Dr. Peter Struck were the keynote speakers. Nine other ministers of defense from the region attended the festivities.