Benjamin Marshall & Charles Eli Fox originally designed the building as a bakery for the Horn & Hardart Automat Company in 1917. Marshall & Fox were best known for their hotels, theaters, and luxury high-rise residences, including both The Drake Hotel and The Blackstone Hotel and Theater.

Today, the building retains many of its original features, such as the carved stone details on the exterior and the dramatic third floor windows.

László Moholy-Nagy, former director of the New Bauhaus School in Chicago, opened the School of Design on the second floor in 1939 with the support of Walter Paepcke.

The school became the Institute of Design in 1944 and remained in the building until 1949 when it became part of the Illinois Institute of Technology. Ludwig Mies van de Rohe opened his studio around the corner when he moved to Chicago to become director of IIT's Architecture School.

From 1932 to 1960, the Chez Paree, located on the third floor of the building, played host to many of the world's best known entertainers, including Frank Sinatra, Louis Armstrong, Bob Hope, Milton Berle, Sammy Davis Jr., Sophie Tucker, Joe E. Lewis, Lena Horne, Jimmy Durante, Tony Bennett, and many others. A true Chicago institution, the Chez Paree was one of the most popular supper clubs in the country.

Today the Schatz Building remains a center of cultural activity and a Streeterville landmark.