The Catholic Order of the Holy Sepulchre has a foundation myth that connects it with Godfrey of Bouillon or even Charlemagne. According to the Catholic Encyclopedia it is in historical reality a secular confraternity, which gradually grew up around the most central of the Christian holy places. As it was for the deliverance of the Holy Sepulchre that the crusades were organized, so for its defence were military orders instituted.

Godfrey of Bouillon took no other title than that of "Defender of the Holy Sepulchre", and different Latin princes, Bohemond I of Antioch, and Tancred, Prince of Galilee, bound themselves vassals of the Holy Sepulchre as to a king. The fall of the Kingdom of Jerusalem did not suspend pilgrimages to the Tomb of Christ, or the custom of receiving knighthood there, and, when the custody of the Holy Land was entrusted to the Franciscans, they continued this pious custom and gave the order its first grand masters.

The official arrival of the Franciscan Friars Minor in Syria dates from the Bull addressed by Pope Gregory IX to the clergy of Palestine in 1230, charging them to welcome the Friars Minor, and to allow them to preach to the faithful and hold oratories and cemeteries of their own. In the ten years' truce of 1229 concluded between Frederick II of Sicily and the sultan Al-Kamil, the Franciscans were enabled to enter Jerusalem, but they were also the first victims of the violent invasion of the Khwarezmians in 1244. Nevertheless, the Franciscan province of Syria continued to exist, with Acco as its seat. The monks quickly resumed possession of their convent of Mount Sion at Jerusalem. The Turks tolerated the veneration paid to the tomb of Christ and derived revenue from the taxes levied upon pilgrims. In 1342, in his Bull Gratiam agimus, Pope Clement VI officially committed the care of the Holy Land to the Franciscans. (The restoration of a Latin Patriarchate of Jerusalem by Pius IX in 1847 superceded the Franciscans.)

Consequently, after 1342, the Franciscans enrolled applicants among the lay confraternity of the Knights of the Holy Sepulchre, in ceremonies frequently mentioned in the itineraries of pilgrims.

The confraternity has never been an order, since it has had no monastic rule, no regular organization, nor community of goods. Where mention is made of the "possessions of the Holy Sepulchre", the allusion is to the Canons of the Holy Sepulchre, who had convents in various lands, and not to the knights.

Pilgrims were received into this lay confraternity with an elaborate ceremonial of ancient chivalry, although the fundamental rules of the institution were not always observed. In point of fact all classes were represented in these pilgrimages, and it is easy to understand why those who had accomplished this trying devotion, then so fraught with danger, should desire to carry away from Jerusalem some such lasting souvenir as the insignia of knighthood, and that refusal was difficult, especially since the sanctuary was practically dependent on the offerings of these merchants. In the ceremonial of reception, the role of the clergy was limited to the benedictio militis, the dubbing with the sword being reserved to a professional knight, since the carrying of the sword was incompatible with the sacerdotal character.

From 1480 to 1495, there was in Jerusalem a German knight, John of Prussia, who acted as steward for the convent who regularly discharged this act reserved to knighthood. It was also of frequent occurrence that a foreign knight, present among the crowds of pilgrims, would assist at this ceremony. However, in default of other assistance, it was the superior who had to act instead of a knight, although such a course was esteemed irregular, It was since then also that the superior of the convent assumed the title of grand master, a title which has been acknowledged by various pontifical diplomas, and finally by a Bull of Benedict XIV dated 1746.

When Pius IX re-established a Latin Patriarchate of Jerusalem in 1847, he transferred to it the office of grand master of the order. At the same time he drew up and in 1868 published the new statutes of the order, which created the three ranks — that of the grand cross, that of commander, and that of simple knight — ordained that the costume be a "white cloak with the cross of Jerusalem in red enamel", and regulated the chancellor's fees. Pius X assumed the title of Grand Master, delegating his powers to the Latin patriarch of Jerusalem.