The columned home, originally built as a monument to George Washington between 1802 and 1818, will be restored to its historical appearance in 1860, before the start of the U.S. Civil War.
Rubenstein, Carlyle Group co-founder and history buff, said the site crowns the most sacred land in America but needed major repairs.
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Historical: The historic Arlington House at Arlington National Cemetery in Virginia was originally built as a monument to George Washington overlooking the nation's capital and was later home to Confederate General Robert E. Lee
Donor: Philanthropist David Rubenstein (center), pictured with Park Ranger and project manager, Brandon Bies (right) is donating $12.3 million to restore Arlington House in Virginia
The money he donated to National Park Foundation will also go toward fixing the grounds and slave quarters, and overhauling the site's museum exhibits.
'The goal is to remind people of American history,' Rubenstein said. 'I think when you're restoring history, you should remind people of the good and the bad.'
Arlington House, as it is known, was built by Washington's step grandson, George Washington Parke Custis and his slaves on a hilltop overlooking the new capital city and the Potomac River. Lee later married into the family, and it became his family's plantation estate.
After Lee resigned from the Union army and joined the Confederacy, Union troops captured the estate during the Civil War and made it their military headquarters to defend Washington from Virginia. Graffiti from Civil War soldiers is still visible in the mansion's attic.
After the war, the area became a community for emancipated slaves, and Union troops began burying their war dead on the grounds, in part to prevent Lee from returning.
It eventually became Arlington National Cemetery, the burial site for many soldiers as well as President John F. Kennedy. Casualties were first buried there in 1864, after the United States Soldier's Cemetery in Washington, D.C. and the Alexandria Cemetery in Alexandria, Virginia, were full.
Dilapidated: Some of the ceilings inside Arlington House leak the climate control system is so unstable some artwork can't be displayed
Tourist spot: More than 650,000 tourists visit Arlington House and walk through its rooms every year
Donation: Philanthropist David Rubenstein pictured inside the historic Arlington House at Arlington National Cemetery
Overhaul: David Rubenstein's $12.3 million donation will also be used to overhaul the museum's exhibits and fix the interiors of Arlington House
The 200-year-old house and grounds symbolize the nation's reconciliation after the Civil War, said National Park Service Director Jonathan Jarvis, but it is in poor condition.
The roof leaks inside, and the climate control system is so unstable some artwork can't be displayed. Decorative paint on the building's facade is peeling away.
Exhibits in a nearby museum building haven't been updated in 30 years. The needs are part of an $11 billion backlog on maintenance across the national parks.
'We frankly do not get enough appropriations on an annual basis to take care of these places,' so private support is critical, Jarvis said.
Commander: Robert E. Lee (1807-1870), Commander-in-Chief of the Confederate armies during the Civil War, pictured in undated photo
Still, the home is the most visited historic house in the national park system. It receives about 650,000 visitors each year, and between one and two million people visit the grounds, park officials said.
'As you can imagine, that's fantastic but it also leads to a certain level of wear and tear,' said Project Mangaer Brandon Bies.
Some restoration planning has already begun or will be designed starting later this year. Much of the work will be completed in late 2015 through 2016.
Plans call for scaffolding to be built around the brick-and-stucco house for artisan painters to restore the decorative design that looks like marble. Interior systems will be replaced. Slave quarters will be completely restored, along with the grounds.
Art and decorative features brought centuries ago from Washington's Mount Vernon estate and from Lee's West Point office will be conserved.
Even Lee's plumbing system that provided early flush toilets inside when such contraptions were extremely rare in the 19th century will be restored.
The work may require the house to close for a short time during periods of low visitation in the late fall and winter, but other parts of the site will remain open.
'It's an extraordinary site,' Rubenstein said, 'and I think all Americans will benefit from having it restored.'
Rubenstein's gift complements President Barack Obama's Centennial Initiative to invest in National Park Service sites as a way to mark the agency's 100th anniversary in 2016, according to the NPS.
Historical monument: The historic Arlington House mansion (top) is on the grounds of the Arlington National Cemetery in Arlington, Virginia
SACRED LAND: THE INCREDIBLE HISTORY OF ARLINGTON HOUSE
1. It was built as a monument to honor President George Washington, modeled after the Temple of Hephaestus in Athens, Greece, by his step grandson George Washington Parke Custis and his slaves.
2. Robert E. Lee married into the Custis family, and Arlington House became his family estate from 1831 to 1861. This was where Lee wrote his resignation from the U.S. Army to join the Confederacy.
3. Selina Gray, a slave, was left in charge to care for Arlington House and its heirlooms from the Washington family when the Lee family evacuated. When Union soldiers took over the site, Gray confronted soldiers over stolen objects and convinced a commander to safeguard the house and family treasures.
4. The home's builder was also an artist. His 200-year-old frescos have been preserved on the walls, and he painted a large mural of George Washington at the Battle of Monmouth that remains in the house.
5. President John F. Kennedy made an unannounced visit to Arlington House in March 1963 and marveled at the hilltop view overlooking the nation's capital. That visit led to Jacqueline Kennedy's decision to have her husband buried below the house with a similar view from Arlington National Cemetery, despite family wishes to have him buried in Massachusetts.
Confederate General Robert E. Lee poses in a late April 1865 portrait taken by Mathew Brady in Richmond, Virginia. By the end of the war, Lee had been appointed as general-in-chief of all Confederate forces, having led numerous armies into battle against Union forces during the conflict. It was Lee's surrender to General Ulysses Grant at Appomattox Court House on April 9, 1865 that signaled the end of the war.
People visit the eternal flame at the grave site of former President John F. Kennedy burns at Arlington National Cemetery in Arlington, Virginia, on October 29, 2013. (AP Photo/Susan Walsh)