The research history of Palaeotherium is complicated given its extensive fossil record and lengthy taxonomic history, with the earliest record of its fossils dating back to 1782 when the French physicist Robert de Lamanon described the skull of what the naturalist Georges Cuvier described as belonging to P. medium in 1804. Cuvier initially recognized its affinities to tapirs and rhinoceroses and classified fossil material to three different species based on size. From 1805 to 1824, he established additional species based on the morphologies of postcranial remains and drew a reconstructed skeleton of P. magnum in 1824. The fossil mammal genus was the fourth to have been recognized with undisputed taxonomic authority. Palaeotherium had since been a subject of significant attention by many other palaeontologists, and it was gradually revised to be recognized as taxonomically distinct from its other perissodactyl relatives.
Since 1804, many species names, valid or invalid, were erected by European and North American naturalists. Palaeotherium was not known by any complete skeleton until when two different skeletons of P. magnum were uncovered in 1873 and the early 20th century, respectively, within France. The most significant taxonomic revisions were conducted by German palaeontologist Jens Lorenz Franzen, then a graduate student, in 1968 when he synonymized many species names and recognized subspecies within the genus based on morphological variations from different species. Although not as strongly influential in modern culture, it is a well-known taxon within European palaeontology and has been acknowledged as an important find in the history of palaeontology.