The Princely State of Muhammadgarh was one of the well known native states of British India, which existed during the rule of the British Empire in India. During the early 19th century, the region was appointed as one of the princely states of India under the indirect rule of the British Government of India. The region covered a total area of 29 sq miles and comprised of a total population of 2,888 in the year 1941. The Princely State of Muhammadgarh included around 18 villages, as well as various small enclaves which were almost completely encompassed by the district of Bhilsa in Gwalior, in the year 1941. One of these shared a short boundary with Bhopal in the east. The princely state of Muhammadgarh was incorporated as a part of the Bhopal Agency, which was an erstwhile political and administrative unit of the British Empire. It was established in 1818 and was under the Central India Agency.

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.