Tradition has it that the saint, with his disciples, chose to conduct this hermit life in the natural grottos of Monteluco. Since then, and through the centuries, the hill was destined to become the equivalent of a big "monastery" given the numbers of people who wished to follow the example of the saint.
In 1547 Bishop Fabio Vigili founded the Congregation of the Hermit Fathers of Monteluco and the Eremo of Santa Maria delle Grazie soon after became their centre.
On the 18th September 1556, Michelangelo, who was already over 80 at the time, having heard about the imminent taking of Rome by Spanish troops led by the Duke of Alba, took refuge "in the mountains of Spoleto", not only due to his friendship with the Bishop Alessandro Farnese, but also because of the great spiritual prestige enjoyed by the community around the Eremo delle Grazie. In a letter addressed to Vasari, he wrote that he had felt "great pleasure in the mountains of Spoleto visiting the hermits[…], that only in the forest is there peace".
This last phrase of the great Master has become the motto that can be found reproduced all around the Eremo.
The bishop of Spoleto, Sanvitale (1591) and Cardinal Cybo (1613-1700), who were both very fond of the place, enlarged the site and enriched it with precious decorations.
In 1806 the army of Napoleon occupied the hermitage, leaving marks on the walls as a sign of their presence: it is possible that the Eremo was used as an infirmary.
In 1860 the heritage of the Congregation of the Hermit Fathers of Monteluco passed to the local Charity Congregation and subsequently the Eremo was sold into private hands. In 1918 it was bought by Arrigo Piperno, a famous dentist, amongst whose patients were Pope Pius XII, some members of the royal family, the poet Gabriele D'Annunzio and Benito Mussolini. In 1952 Professor Pio Lalli, his nephew, continued the work of conservation and improvement of the house with the same love and the same passion as his uncle. In 1991 he transformed it into a "Historical Residence", the first of its type in Umbria, with his desire to open the ancient site to guests and transmit to them its important and unique history.