The Kota Kayang Museum is situated in the locality of Kayang Hill, Lambong Panah Hill, Jagat Hutang Hill, Wai Hill and Menara Hill in the Kayang vicinity. It was built at the site of the old palace of the Kedah-Perlis royal family, as evidenced by the presence of the tomb of Sultan Dhiauddin Al-Mukarram Shah. The design of the museum building was inspired by the Perlis traditional Malay house.

Kota Kayang Museum is currently sited on a land belonged to Syed Salim who built his family home there at the end of the 19th century. The place was sold to the state government, which turned it into the official residence of the British Advisers but became a military administration during the Japanese occupation during WWII.

It was also the official residence of the Menteri Besar of Perlis after Malaya gained independence from the British in 1957. In 1991, the old building was demolished and rebuilt - structurally identical to the previous building and was converted into a museum.

The museum comprises six galleries, namely the history gallery, archaeology gallery, royal gallery, weaponry gallery, culture gallery and the Perlis Menteri Besar gallery. The museum also houses Islamic artefacts, Perlis crafts and royal family heirlooms.