The history of the Inner Temple begins in the early years of the reign of Henry II (1154–1189), when the contingent of Knights Templar in London moved from the Old Temple in Holborn to a new location on the banks of the River Thames, stretching from Fleet Street to what is now Essex House.
The original Temple covered much of what is now the northern part of Chancery Lane (originally New Street), which the Knights created to provide access to their new buildings. The old Temple eventually became the London palace of the Bishop of Lincoln. After the Reformation it became the home of the Earl of Southampton, and the location is now named Southampton Buildings.
The first group of lawyers came to live here during the 13th century, although as legal advisers to the Knights rather than as a society. The Knights fell out of favour and the order was dissolved in 1312, with the land seized by the King Edward II and granted to the Knights Hospitaller. The Hospitallers probably did not live on the property, however, but rather used it as a source of revenue through rent.
During the 12th and 13th centuries the law was taught in the City of London, primarily by the clergy. During the 13th century two events happened that ended this form of legal education; first, a papal bull of 1207 that prohibited the clergy from teaching the common law, rather than canon law, and second, a decree by King Henry III on 2 December 1234 that no institutes of legal education could exist in the City of London. As a result, the Church ceased to have a role in legal education in London. The secular, common law lawyers migrated to the hamlet of Holborn, as it was easy to get to the law courts at Westminster Hall and was just outside the City.
Two groups occupied the Hospitaller land, and became known as the "inner inn" (occupying the consecrated buildings near the centre of the Temple) and the "middle inn" (occupying the unconsecrated buildings between the "inner inn" and the Outer Temple). These became the Inner Temple and the Middle Temple, and were distinct societies by 1388, when they are mentioned in a year book. The Hospitallers leased the land to the Inner Temple for £10 a year, with students coming from Thavie's Inn to study there.