1570s, "position of an ambassador," from Middle French embassee "mission, charge, office of ambassador," Old French ambassee, from Italian ambasciata, from Old Provençal ambaisada "office of ambassador," from Gaulish *ambactos "dependant, vassal," literally "one going around," from PIE *amb(i)-ag-to, from *ambi- (see ambi-) + *ambi- "around" (see ambi-) + *ag- "to drive, move" (see act (n.)).
Meaning "official residence and retinue of an ambassador" is from 1764. In earlier use were embassade (late 15c.), ambassade (early 15c.).