It was abandoned by the early 19th century for unknown reasons, possibly because of dwindling water supply, an earthquake, or as a local legend claims, because of the atrocities by the Jaisalmer State's minister Salim Singh.

Over the years, Kuldhara has acquired a reputation as a haunted site, and the Government of Rajasthan decided to develop it as a tourist spot in the 2010s.

Tawarikh-i-Jaisalmer, an 1899 history book written by Lakshmi Chand, states that a Paliwal Brahmin named Kadhan was the first person to settle in the Kuldhara village.

Using the figure of 3.97 persons per household based on these statistics, and considering the number of ruined houses as 400, S. A. N. Rezavi estimated the 17th-18th century population of Kuldhara as 1,588.

The various jatis mentioned in the inscriptions include Harjal, Harjalu, Harjaluni, Mudgal, Jisutiya, Loharthi, Lahthi, Lakhar, Saharan, Jag, Kalsar, and Mahajalar.

Apart from the Paliwal Brahmins, the inscriptions also mention two sutradhars (architects) named Dhanmag and Sujo Gopalna.

[8] If the idols on the devalis are considered as representatives of the contemporary fashion, it appears that the men of Kuldhara wore Mughal-style turbans and jamas (tunic-like garment) with kamarband (a type of waist belt).

When the water in the khareen evaporated, it left soil conducive for growing jowar, wheat and gram.

The dwindling water supply would have greatly reduced agricultural productivity, without a corresponding reduction in tax demands from the Jaisalmer State.

[12] A local legend claims that Salim Singh, the cruel minister of Jaisalmer, levied excessive taxes on the village, leading to its decline.

B. Roy et al., published in Current Science, suggests that Kuldhara and other neighbouring Paliwal villages (such as Khabha) were destroyed because of an earthquake.

According to the authors, the ruined houses in these villages show evidence of earthquake-related destruction, such as "collapsed roofs, fallen joists, lintels and pillars".

[17] The authors further state that their theory is supported by "the evidence of recent tectonic activities and the observed ground movements along several major faults in the region".

[20][21] The local residents around the area do not believe in the ghost stories, but propagate them in order to attract tourists.

They claimed to have encountered moving shadows, haunting voices, talking spirits, and other paranormal activities.

Many tourists accused them of defacing heritage property, and subsequently, the Rajasthan government stalled the shooting.

The Archaeological department imposed a fine of ₹ 100,000 on the producers, and also asked them to deposit ₹ 300,000 for restoring the defaced structures.

After three days of restoration, the Taliban pictures, the Urdu phrases and the cow dung were removed from the walls.

The plan includes establishment of visitor facilities such as a cafe, a lounge, a folk-dance performance area, night-stay cottages and shops.