It was first constructed in 1783 as a small shrine by Baghel Singh to commemorate the martyrdom site of the ninth Sikh Guru, Tegh Bahadur and was probably expanded after Indian Rebellion of 1857 or after Partition of India.

Situated in Chandni Chowk in Old Delhi, it marks the site where the ninth Sikh Guru was beheaded on the orders of the Mughal emperor Aurangzeb on 11 November 1675.

[6][8] Another gurudwara by the same name, Gurudwara Sisganj Sahib at Anandpur Sahib in Punjab, marks this site, where, in November 1675, the head of the martyred Guru Teg Bahadur, brought by Bhai Jaita (renamed Bhai Jivan Singh according to Sikh rites), in defiance of the Mughal authorities, was cremated.

The trunk of the tree beneath which the head of the Guru was severed and the well used by him for taking bath during his prison term have been preserved in the shrine.

[9] He occupied the Diwan-i-Am, the Mughal emperor Shah Alam II made a settlement with them agreeing to allow Baghel Singh to raise gurudwaras on Sikh historical sites in the city and receive six annas in a rupee (37.5%) of all the octroi duties in the capital.