The agency was created in 1921, on the model of the Central India Agency and Rajputana Agency, and dealt with forty princely states in northwest India formerly dealt with by the Province of Punjab.

[1][2][3] After 1947, all of the states chose to accede to the Dominion of India, except Bahawalpur, which acceded to the Dominion of Pakistan.

They later came into direct diplomatic relations with the British province of Punjab, with the exception of Tehri Garhwal State, which had a connection instead with the United Provinces.

[4] The Punjab States Agency was established in 1921 out of the previous Punjab Native States, which had received advice from the Lieutenant Governor of Punjab Province, and the Simla Hill States, advised by the Deputy Commissioner of Simla district.

[5] The agency was created under the direct authority of the Governor General of India, with its headquarters in Shimla.