Sultanpur Lodhi is one of the most ancient cities of India, estimated to have been established around the 1st century AD.

Cunningham, in his History of the Sikhs, says that Sultanpur was originally called Tamasvana and was very famous as a Buddhist settlement. Over the years it had become a picture of decay and neglect.

It was restored partially by Sultan Khan Lodhi, a general of Mahmud Ghazni. The Governor of Lahore at the time was Tatar Khan Lodhi, a cousin of Behlol Khan Lodhi, the founder of the Lodhi dynasty.

Tatar Khan Lodhi had given the area of Sultanpur to his son Daulat Khan Lodhi as a jagir in 1504. Daulat Khan would later become the governor of Lahore. But even after he moved to Lahore, he retained Sultanpur as the capital of his personal jagir.

Sultanpur Lodhi was also the center point of the old trade route between Delhi and Lahore. It was a major trade center of north India at that time.

During Guru Nanak's stay in Sultanpur, Daulat Khan Lodhi was the nawab. Sultanpur soon earned a reputation as a rich and prosperous town. Many young and enterprising men came there to make their fortune and then stayed on, contributing further to the town's prosperity.