Narkanda has mythological reference and the hills are believed to be a site where the Pandavas resided during their exile. Not much is known about the history of the place as it was merely a poorly habited hilly area. However its history can only be vaguely attributed to the history of Shimla.

The area was ruled by the Kashmir King Sankar Varma, following the invasion of Mahmud Ghazni and then was ruled by the Rajput king Maharaja Ranjit Singh. The territory was ruled by the Mughals also after which The Gorkhas (a tribe) who were ruling Nepal since 1768 slowly began to expand their rule by building forts around Shimla and destroyed the territory considerably under the leadership of Amar Singh Thapa. On 25 January, 1971 Himachal Pradesh Act was declared as a separate state by Parliament and Shimla was a district of the State with Narkanda as one town.

The fate of Narkanda took a turn when Mr. Satyanand Stokes brought the apple to Narkanda and the nearby places and this greatly contributed to the economy of the area. Today Rs 3,000 Crore direct and indirect income of Himachal is generated through apple production. Cherry cultivation is also becoming a major occupation of the area.