The project was undertaken by a consortium known as the Mangla Dam Contractors,[4] which consisted of eight American construction firms sponsored by the Guy F. Atkinson Company based in South San Francisco, California.

Until 1967, the entire irrigation system of Pakistan was fully dependent on unregulated flows of the Indus River and its major tributaries.

The agricultural yield was very low for a number of reasons, the most significant being a lack of water during critical growing periods.

[9] The powerhouse, which consists of turbines, generators, and transformers, has been constructed at the toe of an intake embankment at the ground surface elevation of 865  feet SPD.

Pakistan initially committed to supplying free electricity to the entire region of Azad Kashmir and providing complimentary clean water to the city of Mirpur.

However, over time, this agreement was not transparently upheld, resulting in Pakistan encountering challenges in fulfilling its financial obligations related to royalty payments for electricity and water services in Azad Kashmir.

Over 280 villages and the towns of Mirpur and Dadyal were submerged and over 110,000 people were displaced from the area as a result of the dam being built.

[13] Some of those affected by the dam were given work permits for Britain by the Government of Pakistan, and as a result, in many cities in the UK the majority of the Pakistani community originates from the Dadyal-Mirpur area of Kashmir.

The project was designed primarily to increase the amount of water that could be used for irrigation from the flow of the Jhelum and its tributaries.

Its secondary function was to generate electrical power from the irrigation releases at the artificial head of the reservoir.

The project, though not initially designed as one, also works as a flood control structure by retaining water during the flood-prone season of Monsoon.

[14] On 5 December 1971, the dam was damaged due to a bombing raid conducted by the Indian Air Force during the Indo-Pakistani War of 1971.

Radio Pakistan reported that "the water level in Mangla Dam has attained the maximum height of 1237.15 feet in the history and it is still increasing.

[citation needed] In November 2012, the United States announced a grant of $150 million for the expansion of the Mangla Dam powerhouse.

Under the project, $400 million would be spent on the Mangla Dam powerhouse which is estimated to provide additional production for the next 40 years.