Mishkenot Sha'ananim in the context of Mount Zion

The expansion of Jerusalem outside of the Old City walls, which included shifting the city center to the new neighborhoods, started in the mid-19th century and by the early 20th century had entirely transformed the city. Prior to the 19th century, the main built up areas outside the walls were the complex around King David's Tomb on the southern Mount Zion, and the village of Silwan.

In the mid-19th century, with an area of only one square kilometer, the Old City had become overcrowded and unsanitary, with rental prices on a constant rise. In the mid-1850s, following the Crimean War, institutions including the Russian Compound, Kerem Avraham, the Schneller Orphanage, Bishop Gobat school and the Mishkenot Sha'ananim compound, marked the beginning of permanent settlement outside Jerusalem's Old City walls.

Sir Moses Haim Montefiore, 1st Baronet, FRS (24 October 1784 – 28 July 1885) was a British financier and banker, activist, philanthropist and Sheriff of London. Born to an Italian Sephardic Jewish family based in London, after he achieved success he donated large sums of money to promote industry, business, economic development, education and health among the Jewish community in the Levant. He founded Mishkenot Sha'ananim in 1860, the first Jewish settlement outside the Old City of Jerusalem.

As President of the Board of Deputies of British Jews he corresponded with Charles Henry Churchill, the British consul in Damascus, in 1841–42; his contributions are seen as pivotal to the development of Proto-Zionism. Queen Victoria's chaplain, Norman Macleod said of Montefiore: "No man living has done so much for his brethren in Palestine as Sir Moses Montefiore". He stated in an interview in the 1860s that "Palestine must belong to the Jews".