The museum was founded by O. P. Jain[5] in 1990, under the aegis of the Sanskriti Foundation, a New Delhi–based non-profit organisation established in 1978.

In the early years, it was largely privately funded by its members, later on it was received government funding, and from organisations like Indian Council for Cultural Relations (ICCR), and the Ford Foundation, and recently from the corporate sector.

Today the foundation also runs artist-in-residence programs here, and workshop for scholars, artists and craftsmen, plus it has residential studios, a library, an amphitheatre and an art gallery.

[7] As its first project, the foundation instituted the 'Sanskriti Awards' in 1979, given to promising young talent in the group of 20–35 years, in five major fields, Literature, the Arts, Music, Dance, Theatre, Journalism and Social/Cultural Achievement.

[10] It houses a collection of what is called "Everyday Arts", where artisans turn the functional everyday household object like toys, nutcrackers, cups, saucers, spoons, and home shrines, articles of worship, into the works of art.