The building was designed by the local architect, Muhammad Kamar Ya'akub. The inspiration for the design is based on a traditional moon kite in flight.[2] The turquoise folds on the roof and the intricate design of the foyer are just two of the interesting features of the building. Istana Budaya's architecture has intrigued experts and academics.

The main building takes the shape of the sirih junjung, a traditional arrangement or a present made of betel leaves used during Malay weddings and welcoming ceremonies. As in a traditional Malay house, the building is divided into three areas:

- The serambi (lobby and foyer)
- The rumah ibu (main house) as the auditorium
- The rumah dapur (kitchen) as the stage and rehearsal hall.

The interior was constructed using local resources such as Langkawi's marble and high-quality tropical wood for the doors crafted by hand to shape flowers and leaf motifs.

The verdant carpets in the entrance hall and lobby feature cempaka flower and the banyan tree, inspired by traditional Malay opera or Mak Yong.[3]

In the auditorium, there are royal boxes on each side, patterned after the windows of a Malay house. The entrance to the theatre, too, replicates a palace's main hall, or the Balairong Seri and is said to be modelled after one in Malacca.

The theatre lobby on the third floor extends the influence of Malay culture, taking the shape of the rebana ubi or traditional drum. The auditorium itself seats about 1,412 people, including 797 in the stalls on the first floor, 312 in the grand circle on the second floor and 303 people in the upper circle. The orchestra pit, when it is not in use, can take in 98 people.

Istana Budaya has wheelchair facilities, including a ramp into the foyer, a lift with easy-to-reach buttons and an area designated for the handicapped. Restrooms for the disabled are also found at both the stalls and grand circle areas.

Additionally, there is also a costume gallery featuring clothes from Malay traditional theatre. The costumes are from Bangsawan, Mak Yong, Ajat Bebunuh, Layang Emas and Bambarayon performances, among others.