The chapel is historically described as being dedicated to St.Margaret, queen of Scotland, who died in 1093. The structure is built as a slightly irregular rectangle on plan; internally it consists of a barrel-vaulted nave and a semi-domed apsidal sanctuary which is slightly out of line with the nave. There is a decorated chancel arch between the two chambers. Sometime after 1573, the rock around three sides of the chapel was quarried away and these walls underpinned. After the Cromwellian seige, the chapel lost its identity and was put to secular use. By the 1840s, when the chapel was rediscovered, the building had been divided by another floor and was being used as a powder magazine. Subsequent to this, the chapel was restored and the later floor removed. On the north side of the eastern chancel, there is evidence of a doorway which went through the wall, but this was later blocked on the exterior of the chapel to form a locker/cupboard. It has been suggested that the chapel is all that remains of a larger building. The only decoration surviving is on the chancel arch.

No contemporary source states where Queen Margaret died, but in the 14thc. John of Fordun wrote that Queen Margaret died in castro puellarum in Edinburgh. It is recorded that King Edgar died at Edinburgh Castle in January 1107. But the first reference to a church in the castle comes about 1130 with Bishop Robert of St Andrew's charter confirming the church in the castle to the monks of Holyrood Abbey. It is not certain to which church this refers, as there was a second church in the castle, dedicated to St Mary. In 1174, the castle was handed over to King Henry II of England as security for the ransom of King William the Lion of Scotland, who was in prison at the time in Falaise (Normandy). The castle was only restored to the Scottish King in 1186 on King William’s marriage to Ermengarde de Beaumont.

Queen Margaret died in 1093, but the chapel itself can be ascribed principally to the early-to-mid 12thc. It has, however, been suggested that it is possible that the structure may contain portions of an earlier building on the site, especially since the chancel arch wall does not bond with the outer walls. The burgh of Edinburgh seems most likely to have been created in the 1120s (it is first mentioned in 1125) by King David I, and the foundation of Holyrood Abbey, outside the eastern end of the burgh, took place in 1128. The decoration on the chancel arch would fit with an 1120s date or soon thereafter.