The ancestors of the founders of Indore were hereditary Zamindars and indigenous landholders (Jehangirdars) of Malwa. In Mughal times, the founders of these families received titles such as Rao and Chaudhari, which established their claim to the land. In the 18'th century, control of Malwa passed to the Peshwa clan, and the Chaudharis came to be known as "Mandloi"s (derived from Mandals) because of the language they used and eventually the Holkars conferred the family with the title of Rao Raja. (pp. 68-70)Major General Sir John Malcolm's Central India Part I). The family retained its possessions of royalty, which included having an elephant, Nishan, Danka and Gadi even after the advent of Holkars and also retained the right of performing the first puja of Dushera (Shami Pujan) before the Holkar rulers. Under Mughal rule, the family enjoyed great influence and was accorded confirmatory sanads by the Emperors Aurangzeb, Alamgir and Farukhshayar, confirming their 'Jagir' rights. Rao Nandlal Chaudhary Zamindar, upon visiting the court of Delhi, received a special place in the emperor's court along with two jewel studded swords (now at display in the Royal British Museum under the family's name) and confirmatory sanads. Raja Savai Jai singh of Jaipur a personal friend of his gifted him with a special "Gold Langar" which guaranteed a special place to him in all the Durbars of India. The family's respectability and influence over Malwa was instrumental in the ascent of the Peshwas and Holkars to rulership of this region.

Rao Nandlal Chaudhary, the founder of Indore, was the Chief Zamindar (landlord), and had an army of 2000 soldiers. In 1713, Nizam was appointed as the controller of the Deccan plateau area, which renewed the struggle between the Marathas and the Mughals. From time to time the Maratha invaders kept harassing the people of Malwa and thus Rao Nandlal arranged to pay 25000 rupees to them in return for guaranteeing the safety and security of his people, upon which the invaders returned back to the Deccan. (Memoirs of Malwa: Major General Sir John Malcolm: year 1912)

While visiting the temple of Indreshwar near the banks of river Saraswati, Rao Nandlal found the location to be safe and strategically located, being surrounded by rivers on all sides. He started moving his people in, constructed the fort of Shree Sansthan Bada Rawala to protect them from harassment by Marathas and Mughals. The city was named Indrapur (after Lord Indreshwar), and eventually came to be known as Indore.

Baji Rao Peshwa finally received the Viceroyalty of Malwa in 1743 A.D. and was bound by a treaty forbidding him from ever infringing upon the rights of Zamindars. Malhar Rao Holkar was one of the four signatories who guaranteed the proper fulfillment of the conditions. (Major General Sir John Malcolm's, Memoirs of Central India Vol. I pp.94-95)Upon victory The Peshwas appointed Malhar Rao Holkar as a "Subhedar", which marked the beginning of Holkars' reign in Malwa.

Thus, Indore came to be ruled by the Maratha Maharajas of the Holkar dynasty. The dynasty's founder, Malhar Rao Holkar, (1694-1766), was granted control of Malwa Maratha armies in 1724, and in 1733, was installed as the Maratha governor of the region. By the end of his reign, the Holkar state was de facto independent. He was succeeded by his daughter-in-law Ahilyabai Holkar who ruled from 1767 to 1795. She ruled from a palace-fort at Maheshwar, south of Indore on the Narmada River. Ahilyabai Holkar was an architectural patron who donated money for the construction of Hindu temples across India. In 1818, the Holkars were defeated by the British in the Third Anglo-Maratha War, and the Holkar kingdom became a part of the British Raj. As a result of this defeat in the Battle of Mahidpur, the treaty of Mandsaur was signed, through which the Cantonment town of Mhow was handed over to the British. The treaty also decreed that the capital of the Holkar state would shift from Maheshwar to Indore.

After India's independence in 1947, Indore, along with a number of neighboring princely states, became part of the Indian state of Madhya Bharat. Indore was designated the summer capital of this newly created state. On November 1, 1956, Madhya Bharat was merged into Madhya Pradesh and Bhopal chosen the capital.