The state was founded in 1652. The first Ruler was Maharaja Ratan Singh who married 12 wives, among them Maharani Sukhroopde Kanwar Shekhawat Ji Sahiba, daughter of Kunwar Purshottam Das of Jhajhar (Shekhawati) in Rajasthan. She committed sati in 1658. The state had an area of 1795 km2, which was closely interlaced with the territory of the princely State of Sailana. In 1901, the state had a population of 83,773; the town of Ratlam had a population of 36,321. The state enjoyed an estimated revenue of Rs.34,000 and paid a tribute of Rs.2,850. The town was a junction on the Rajputana-Malwa Railway, and was an important trade centre, especially of opium.
Ratlam was initially held by its chiefs in vassalage to the Sindhia rulers of Gwalior State, but on 5 January 1819 it became a British protectorate, following which an arrangement was made by which the Sindhia engaged never to send any troops into the country or to interfere with the internal administration. In 1861 the tribute was assigned to the British government in part as payment of the Gwalior contingent.