According to a traditional, now almost completely destroyed inscription, the church building was commissioned by the Byzantine Emperor Alexios I Komnenos at the end of the 11th century, and took the place of a previous three-aisled early Byzantine basilica.

The church was dedicated to the Panagia (“All-holy”), a Greek Orthodox appellation for the Virgin Mary. The second part of the name (Episkopi) means “episcopal”. The Panagia Episkopi was the seat of the Orthodox diocese of Santorini until 1207 and from 1537 to 1827.

The church was built in the northern foothills of the Profitis Ilias, the highest mountain on Santorini.

It is approximately 600 metres southeast of the township of Mesa Gonia, which is also referred to as Episkopi Gonias, the name of the previous Episcopal seat.

The eastern coast of the island at Kamari is approximately two kilometres from the church, and Fira, the capital of the island, is five kilometres to the northwest.

Mesa Gonia is connected to the Panagia Episkopi via a partially paved road, which ends in a parking area directly north of the church.