The circuit was designed by architect Hermann Tilke. In December 2013, Formula One President Bernie Ecclestone suggested a 2016 debut, though he briefly considered a move to 2015 due to a contract breach by Korean Grand Prix organizers. In July 2014, it was confirmed the race would debut in 2016. The event is organized by the Baku City Circuit Operation Company (Bakı Şəhər Halqası Əməliyyat Şirkəti). The inaugural race was held as the 2016 European Grand Prix.
In its first year of operation, the track gained a reputation for high attrition; during the 2016 GP2 support race, 12 out of 22 drivers failed to finish. The layout was projected to be the fastest street circuit in the world, with top speeds estimated near 360 km/h (220 mph). At the time of its debut, it was the second-longest circuit on the F1 calendar behind the Circuit de Spa-Francorchamps.
The circuit starts adjacent to Azadliq Square and loops around Government House before heading west along a 1 km (0.62 mi) straight toward the Palace of the Shirvanshahs and Maiden Tower. A defining feature is the narrow 7.6 m (25 ft) uphill section that runs around the Old City. This layout through urban parkland has been compared to the Montjuïc circuit which hosted the Spanish Grand Prix in the 1970s. The lap concludes with a 2.2 km (1.4 mi) stretch along Neftchilar Avenue back to the start line. During qualifying for the 2016 European Grand Prix, Valtteri Bottas set an unofficial Formula One top speed record when Williams claimed data showed him reaching 378 km/h (235 mph), surpassing the previous record of 372 km/h set by Juan Pablo Montoya in 2005.
Safety concerns have frequently centered on the circuit's infrastructure. During the 2016 event, Pirelli found that 90% of rear tires used in practice were cut by bolts securing the kerbs that had not been drilled deeply enough. Drivers Jenson Button and Nico Rosberg expressed concern over the lack of run-off areas, which they noted would be dangerous in the event of high-speed punctures or mechanical failures. In 2021, Rosberg criticized the pit lane entrance location adjacent to the 350 km/h (220 mph) main straight, calling it one of the most dangerous places of the year. Formula One race director Michael Masi disagreed, stating the venue fulfilled all FIA safety and regulation requirements.
Infrastructure-related incidents have caused significant disruptions to track sessions. In 2016, Valtteri Bottas missed the entirety of Free Practice 3 after a loose drain cover caused significant damage to his Williams FW38. Similarly, the first practice session of the 2019 Azerbaijan Grand Prix was cancelled when George Russell hit a loose drain cover.
The circuit currently hosts the Formula One Azerbaijan Grand Prix and the FIA Formula 2 Championship. It previously hosted the 2016 European Grand Prix and the 2016 GP2 Series.
Drivers have praised the circuit for the challenge of its long straights and technical sections, noting there is no margin for error due to the proximity of the walls. In October 2022, Arif Rahimov was dismissed as Executive Director after seven years in the post, with Magsud Farzullayev appointed as acting executive director.
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