As part of the preparations for the coming Operation Barbarossa, the decision was made in late 1940 to build a military headquarters for the Führer in Eastern Europe, similar in concept to the Felsennest in Western Europe. Like the Felsennest, the new headquarters had to be as close to the front as possible, but far enough to be safe from enemy forces.

Eventually, a top-secret site was chosen in the middle of the Masurian woods, in what was then East Prussia, far from roads and urban areas, and accessible only by a single railway and small airstrip. To maintain secrecy, locals were told that the construction works were for a new cement factory. The Organisation Todt completed construction of the entire 6.5 km2 (2+1⁄2 sq mi) complex by 21 June 1941.

Hitler first arrived at the headquarters on 24 June 1941, two days after Barbarossa commenced. At its peak, over 2,000 people lived and worked at the Wolf's Lair, including food-tasters to guard Hitler against poison. Additional construction work began in mid-1944 to enlarge and reinforce many of the original buildings on the site on Hitler's orders, although the work was never completed because of the Red Army's rapid advance during the Baltic Offensive.

Hitler left the Wolf's Lair for the final time in November 1944 after having spent over 800 days there, the longest he had stayed at any place over the course of the war, during a 3+1⁄2-year period.