[6] The curry was developed at the Moti Mahal restaurant in the Daryaganj neighbourhood of Old Delhi in the 1950s, after the Partition of India[7] by Kundan Lal Jaggi and Kundan Lal Gujral,[8] who were both Punjabi refugees from Peshawar, North-West Frontier Province, British India.

[9][10][2] The curry was made "by chance" by mixing leftover tandoori chicken in a tomato sauce, rich in butter (makhan).

[11] In 1975, the English phrase "butter chicken" curry first appeared in print, as a specialty of the house at Gaylord Indian restaurant in Manhattan.

[18][19][13][20][21] Due to its popularity outside of India, it is sometimes mistakenly believed to be of Western origin (like chicken tikka masala, which it is sometimes confused with).

Spices may include cardamom, cumin, cloves, cinnamon, coriander, pepper, garam masala, and fenugreek (Punjabi/Hindi: kasuri methi).