The township was founded by Rai Bhoi and thus was known as Rai-Bhoi-Di-Talwandi.His great grand son Rai Bular Bhatti, renamed it as 'Nankana Sahib' after the birth of Guru Nanak.The Gurdwara Nankana Sahib, originally constructed in around 1600 CE was renovated in the years 1819–20 CE by Gian-Punjab Maharaja Jassa Singh Ramgarhia The Sikh Conference of Panjab, Jammu and Kashmir, Peshawar, Kangra and Hazara.
During the Akali movement, on 20 February 1921, Narain Das, the Udasi mahant (clergy) of the gurdwara at Nankana Sahib, ordered his men to fire on Akali protesters, leading to the Nankana massacre. The firing was widely condemned, and an agitation was launched until the control of this historic Janam Asthan Gurdwara was restored to the Sikhs.Again in the 1930s and 40's the Sikhs added more buildings and more architectural design.
Migration between India and Pakistan was continuous before independence. By the 1900s Western Punjab was predominantly Muslim and supported the Muslim League and Pakistan Movement. After the independence in August 1947, the minority Hindus and Sikhs migrated to India while the Muslimrefugees from India settled in the Western Punjab and across Pakistan
The area around Nankana Sahib was formerly a tehsil of Sheikhupura District. In May 2005, the provincial government decided to raise the status of Nankana Sahib to that of a district as a way of promoting development in the area.
According to reports, there are plans to construct a 100 Acre University as well as hospitals and health care facilities by the descendants of Rai Bular.
In 2007, the Pakistan government announced a plan to set up a university on Sikh religion and culture at Nankana Sahib, the birthplace of Guru Nanak. 'The international Guru Nanak University planned at Nankana Sahib would have the best architecture, curricula and research centre on Sikh religion and culture', Chairman of Pakistan's Evacuee Trust Property Board (ETPB), Gen (Retd) Zulfikar Ali Khan, said.