It is located in the historic centre of the city (21, Hatzikosta street), which was called "Tourkopalouko" and tradition has placed there the original residence of the first Turks of the city. After the movement of Dionysios in 1611, most Christians were chased away from the castle and many settled in the already existing neighbourhoods. Under these conditions, the Christians of Ioannina received permits to expand the old churches, but also to build new ones. One of them was Agios Nikolaos (Agoras) (meaning in Greek: market).

The church was destroyed in 1820 during fierce clashes between Ali Pasha and the sultan' forces. The reconstruction of Agios Nikolaos began for the second time around 1830, with money sent by the Zosimades brothers from Moscow. However, as it is mentioned in the correspondence of the Zosimades, this money "was spent badly, the Church was completed after thanks to the late Hatzikostas's money".