The foundation stone of the project was laid by the prime minister of India Indira Gandhi on 23 October 1984.

In terms of storage of water, it is the largest reservoir in India, with capacity of 12.22 billion cu m or 12.2 km3, followed by Nagarjuna Sagar between Telangana and Andhra Pradesh.

The dam was built as a joint venture between Madhya Pradesh irrigation and National Hydroelectric Power Corporation.

Narmada flows southwestward and after passing through Madhya Pradesh, Gujarat, and a small stretch in Maharashtra, it drains into the Arabian Sea near the Gulf of Khambhat.

Indira Sagar Project (ISP) situated on River Narmada, 12 km from Punasa in Khandwa district of Madhya Pradesh, has been commissioned on 31 March 2005.