History of McLeod Ganj covers with the rich history of Sikhs rule to the British era.

In March 1850, McLeod Ganj was annexed by the British East India Company after the Second Anglo-Sikh War, and soon a subsidiary cantonment for the troops stationed at Kangra District of Himachal Pradesh was established on the slopes of Dhauladhar Mounatin Range, on empty land, with a Hindu rest house or dharamshala; hence the name for the new cantonment, Dharamshala.

During the advent of British rule in India, McLeod Ganj was a hill station where the British spent hot summers, and around the late 1840s, when the district headquarters in Kangra District became overcrowded. The British officials moved two regiments to Dharamshala.

A cantonment was established in 1849, and in 1852 Dharamshala became the administrative capital of Kangra district of Himachal Pradesh. By the year 1855, McLeod Ganj had two important places of civilian settlement, McLeod Ganj and Forsyth Ganj, named after a Divisional Commissioner.

In the year 1860, the 66th Gurkha Light Infantry, later renamed the historic 1st Gurkha Rifles was moved to Dharamshala. Soon 14 Gurkha paltan villages were established nearby and the Gurkhas patronised the ancient Shiva temple of Bhagsunath.

Lord Elgin, the British Viceroy of India (1862-1863), liked the area so much that at one point he suggested it be made the summer capital of India. He died at Dharamshala while on a tour there, on 20th November 1863, and lies buried at the St. John in the Wilderness at Forsyth Ganj, just below McLeod Ganj. His summer residence, Mortimer House, became part of the private estate of Lala Basheshar Nath of Lahore and was acquired by the Government of India to house the official residence of the Dalai Lama.

The original Tea House built by Lord Elgin and catered to by a local grocery store called Nowrojee and Sons continues to prosper to this date as a hangout for visitors to McLeodGanj.

In March 1959, Tenzin Gyatso, the 14th Dalai Lama, fled to India after the failed uprising in 1959 in Tibet against the Communist Party of China. The Indian Government offered him refuge in Dharamshala, where he set up the Government of Tibet in exile in 1960, while McLeod Ganj became his official residence and also home to several Buddhist monasteries and thousands of Tibetan refugees. Over the years, McLeod Ganj evolved into an important tourist and pilgrimage destination, and has since grown substantially in population.