When construction began on the palace, the miller complained about the building activities and the trees in the park to Frederick II, giving rise to the legend of the rebellious miller of Sanssouci. Subsequent owners of the mill were also litigious, and sought to have their lease remitted.

The dilapidated post windmill was replaced by a towering smock mill built by master carpenter Cornelius Willem van den Bosch. His father had come to Potsdam as a grenadier and carpenter; Cornelius Willem himself, however, learned the art of mill-building in the Netherlands. When he died in the middle of construction, his son Christian Ludwig completed the mill, enabling the miller Carl Frederick Vogel to begin operation in 1791. The van den Bosch family worked as master carpenters in Potsdam for a century and a half. Christian Ludwig was a member of the first city council in Potsdam.

Under Frederick William IV, the windmill and its environs were renovated in the Romantic style and the mill ceased to be functional. In 1861, the Historic Mill was opened as a museum of technology, with inventory including three mill gears, disengaging devices, a sack elevator, and shaking screens.

In 1945, the windmill burned down to its base in the battles of World War II. Initial plans for reconstruction were developed in the late 1970s, and in 1983 the Chamber of Trade began work on the project. Ten years later, the exterior of the mill had been reconstructed, and since then the technology has continuously been improved. Today, in addition to its function as a museum, the windmill once again produces flour.