Royal Terrace forms part of the "Calton Hill Scheme" of 1811 for the laying out of a "New Town between Edinburgh and Leith calculated to out-do the splendours of Princes Street." It was planned as the "grandest street in the Calton New Town," and is named in general complement to George III and the Prince Regent (the future George IV).

William Playfair (1789 - 1857) was the son of James Playfair, architect. He studied at Edinburgh University and under William Stark, architect in Glasgow. In 1816, aged 26, he was asked to complete the design of the University started by Robert Adam. Subsequently he designed numerous buildings in Edinburgh including the Observatory on Calton Hill (1818), Gateway to George Heriot's School (1819), the Royal Scottish Academy (1822), St Stephens Church (1826), the Surgeons Hall (1829), Dugalld Stewart's Monument on Calton Hill (1831), Donaldson's Hospital (1842), and the National Gallery on the Mound (1850).

It has been observed that it was to Playfair's buildings, more than to those of any other architect that Edinburgh became known as "The Athens of the North".

After a competition advertised in London, Glasgow and Edinburgh in 1811, 32 plan being received, the Commissioner appointed William H. Playfair in 1818 as an "Architect of eminence and taste" to make out a plan "suited to the varied and picturesque state of the ground". His plans, produced in April 1819 were accepted in providing a "happy union of foliage and building".