The first plan, which never materialised, for a dam on Ghaggar river was first proposed by the British raj in the mid 19th century to provide drinking water to Ambala Cantonment.

[6] The proposal was revisited only in the 1960s to construct a dam on Ghaggar river at Gumthala near Chandimandir to provide water to Chandigarh and control floods in Punjab, India, this plan was abandoned in 1999 as it would have submerged over 4,000 acres (1,600 ha) of land resulting in relocation of a large number of people.

[2] In 2005, the revised plan to build series of smaller dams on the tributaries of Ghaggar river was approved by the Government of Haryana and the construction of the Kaushalya dam commenced in 2008 which was completed in 2012.

[2][6] In 2023, during the North India floods, the dam's gates were opened to release 4000 cusecs of water.

[6] The project was approved in December 2005 by the Haryana Government at the cost of Rs 51.37 crore .