The original airport serving Medina dates back to the 1950s. By 1972, it operated with two runways: 18/36, which remains in use, and 15/33, which has since been decommissioned. Runway 15/33 was closed in 1986. Measuring roughly 8,000 feet, it was later converted into an apron based on historical imagery from Google Earth.

In 2007, the airport was granted international status after a consortium comprising TAV Airports Holding, Saudi Oger Limited, and Alrajhi Holding Group was selected to expand and operate the facility. In October 2011, the group signed a 25-year concession agreement with the General Authority of Civil Aviation (GACA) to redevelop and run Prince Mohammed bin Abdulaziz International Airport.

This concession represented Saudi Arabia’s first full public-private partnership (PPP) in the aviation sector. The initial construction cost totalled US$1.2 billion, with potential expansions raising the figure to US$1.5 billion. It was the largest transport infrastructure project to close in the GCC region in 2012. Funding came from National Commercial Bank, Arab National Bank, and Saudi British Bank through an Islamic financing structure consisting of a three-year US$436 million commodity Murabaha equity bridge, an 18-year US$719 million procurement facility, and a US$23 million working capital facility, largely denominated in Saudi Riyals (SAR).

The new terminal achieved Leadership in Energy and Environmental Design (LEED) Gold certification from the U.S. Green Building Council (USGBC), making Medina Airport the first commercial airport terminal in the Middle East and North Africa to achieve a LEED Gold rating.

The project also received the Middle East Infrastructure Deal of the Year (2013) from Project Finance International Middle East & Africa Awards, and Best Islamic Finance Project Finance Deal of the Year (2013) from the Euromoney Islamic Finance Awards.

Test operations for the new Medina terminal began on 12 April 2015. A Saudia domestic flight from Riyadh, flight SV1435, landed at 11:00 a.m., becoming the first arrival at the upgraded facility. Flight SV1476 departed at 11:45 a.m., marking the first takeoff.

The new terminal complex was officially inaugurated by King Salman on 2 July 2015. Later that year, the project was named the world’s best airport development at Engineering News-Record's 3rd Annual Global Best Projects Competition, held on 10 September 2015. The airport is named after King Abdulaziz’s son, former Crown Prince and first governor of Medina Province, Mohammad bin Abdulaziz.