The Nawabs of the princely state of Muhammadgarh belonged to the Kurwai ruling family, which was founded by a Pathan of the Barakzai Firoz khel, named Muhammad Diler Khan. It was initially a part of Kurwai and was established in the year 1753, which was originally a part of Kurwai, was formed in the year 1753 by a grant of land to the younger son of the nawab of Kurwai, Ahsanullah Khan. After his death in the year 1786, the territory was divided between his two sons, Baqaullah Khan and Mohammed Khan. Baqaullah Khan took charge of the region of Basoda; where as Mohammed Khan received Muhammadgarh state. The Nawab of the princely state of Muhammadgarh refused to accepted the overlordship of Gwalior and was able to retain his independence.
The Princely State of Muhammadgarh was a non- salute state and the native ruler, also known as Indian Prince, who held the title of Nawab exercised the powers of a ruling chief. The princely state of Muhammadgarh was one of the original constituent members of the Chamber of Princes, a number of smaller states indirectly represented by 12 princes who were elected periodically by them.