Following the withdrawal of Turkish troops, in the time of the Cretan independent state the palace was converted into the seat of regional government, and became known as the Old Prefecture Building, also housing the Inland Revenue Service and the courthouse. The prefecture remained there until 1937, when it was transferred to its current premises on Eleftherias Square. Thereafter the building housed the Vikelaia Library and the Heraklion Boys' School. Separate parts of the complex became the Old Town Hall and the Reform Prison.

In 1941 the complex was ruined in German bombing raids. It was demolished by order of the town council and the site was landscaped into what is now Theotocopoulou Park.