It began in 1987 as a kollel run by Rabbis Ami Ulami (killed by terrorists in 1994) and Kalmanzon. Over the next few years, it grew to be a full hesder yeshiva. Rabbi Re'em Ha'Cohen joined the yeshiva in 1993. It adheres to a "dati leumi" philosophy, with a strong emphasis on Hasidic thought and an encouragement of artistic expression.
On December 27, 2002, two Islamic Jihad terrorists infiltrated the yeshiva's dining room and killed four of the yeshiva's students.
Today, Yeshivat Otniel is one of the largest hesder yeshivas, with roughly 350 students.