Chhatarpur was founded in 1785. It is named after the BundelaRajput leader Chhatrasal, the founder of Bundelkhand independence, and contains his cenotaph. The state was ruled by his descendants until 1785. At that time the Ponwar clan of the Rajputs took control of Chhatarpur. The state was guaranteed to Kunwar Sone Singh Ponwar in 1806 by the British Raj. In 1854 Chhatarpur would have lapsed to the British government for want of direct heirs under the doctrine of lapse, but was conferred on Jagat Raj as a special act of grace. The Ponwar Rajas ruled a princely state with an area of 1,118 square miles (2,900 km2), and population of 156,139 in 1901, which was part of the Bundelkhand agency of Central India.
In 1901 the town of Chhatarpur had a population of 10,029, a high school and manufactured paper and coarse cutlery. The state also contained the British cantonment of Nowgaon. After the independence of India in 1947, the Rajas of Chhatarpur acceded to India, and Chhatarpur, together with the rest of Bundelkhand Agency, became part of the Indian state of Vindhya Pradesh. Vindhya Pradesh was merged into the state of Madhya Pradesh in 1956.