Karauli was officially founded in 1348 AD by the Yaduvanshi Rajput, Raja Arjun Pal. This holy city was originally known as Kalyanpuri, after the local deity Kalyanji. Legend has it that the princely state of karauli (17 Gun salutes) was established by Raja Bijal pal Jadon, The 88th descendent of lord Krishna, as far back as 995 AD.

The 600 year Karauli old city palace was built probably in the 14th century by the royal family and a magnificent city palace in 1635 AD. The fort and the city palace remains the official residence of the royal family of karauli till 1938 AD. At that time a much more modern Bhanwar Vilas palace was built by Maharaja Ganesh pal Deo Bhadur. 

Red stone ramparts surrounded the walled city with bastions for security. Till date the city wall boasts of six gates and twelve posterns. The present city palace is the 17th century building with elaborated ornamented stucco work and frescoes. 

The ruling family of karauli are considered the descendents of Lord Krishna, and are Yadav Rajputs, The city is home of Shri Madan Mohanji, the deity of lord Krishna, worshiped by millions of followers from Rajasthan & rest of India. The Temple of Kaila Devi holds an important place among the religious places of Rajasthan. There are 3 fairs, the biggest one is held in the month of Chaitra (March-April).

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