The township was founded by RaiBhoi, a rich landlord Rajput Muslim and thus was known as Rai-Bhoi-Di-Talwandi. His great-grand son RaiBularBhatti, renamed it as ‘Nankana Sahib’ after the birth of Guru Nanak. The GurdwaraNankana Sahib, originally constructed in around 1600 CE was renovated in 1819–20 CE by Gian-Punjab Maharaja Jassa Singh RamgarhiaThe Sikh Conference of Panjab, Jammu and Kashmir, Peshawar, Kangra and Hazara.
Migration between India and Pakistan was continuous before independence. By the 1940s Western Punjab was predominantly Muslim and supported the Muslim League and Pakistan Movement. After independence in August 1947, the minority Sikhs and Hindus migrated to India while the Muslim refugees from India settled in the Western Punjab and across Pakistan.
Nankana Sahib and it surroundings were formerly a Tehsil of Sheikhupura District. In May 2005, the provincial government raised the status of Nankana Sahib to a District as a way of promoting development in the area. The present status is District Nankana Sahib has three tehsils: Nankana Sahib, Shah Kot, and Sangla Hill. Before December 2008, District Nankana Sahib also included Safdarabad Tehsil.
There are plans to construct a 100 acres (40 ha) university as well as hospitals and health care facilities by the district government with mutual interest of local communities and family of RaiBular.