The town of Batala was founded by Rai Ram Dev (or Deo), a Bhatti Rajput from Kapurthala, during the time of Bahlol Khan Lodhi, in 1472 AD. The country between the Sutlej and Chenab rivers, the Gurdaspur District of Northern Punjab, was to a great extent lying waste, owing to disastrous floods and the ravages of Jasrat Khokar (1420s-1430s), and the revenues of the province were farmed to Rai Ram Dev by Tatar Khan, the Viceroy, for nine lakhs of tankas (currency). Ram Dev became a disciple of Sheikh Mohammed Kadiri of Lahore, and was converted to Islam.

The spot first fixed upon the city was considered unpropitious, and so, at the advice of the astrologers, it was exchanged for that on which the present town now stands, hence the name Batala, from "batta" or "vatta", or exchange. The Tomb of Ram Dev, consisting of brick building, with a sloping dome supporting enormously thick walls, constructed of bricks laid in mud, still exists southeast of the town (Ibetson, 1919).

During the Mogul Emperor Akbar's time, enormous gardens were built around the town, and in the suburb known as Anarkali. During the Emperor Aurangzebs' time, the city was enriched with a bazaar and shops, Jama Masjid, and a fine garden with three terraces. Batala at this time enjoyed a great reputation for learning and piety. A college was established during the reign of Farrukhsiar. The Saints Shahab-ud-din Bukhari, Shah Ismail, Shah Niamatullah, and Sheikh Allahdad lived here. The town also has many antiquities connected with the names of many Sikh gurus, and boasts a handsome Sikh golden temple dedicated to Baba Nanak. The town had gained for it the title of Batala Sharif (respected town).

Batala was also the center of a petty warfare constantly being waged between the Sikh Misals of Kanhayas and Ramgarhias. From 1798 to 1811, the town was ruled by lady Musammat Sada Kaur of one of these Sikh Misals. This remarkable women is still remembered at Batala, which she appeared to have administered with great energy and tolerable success. In 1820 she was called upon by Maharaja Ranjit Singh to make over half her possessions for the support of his grandsons, Sher Singh and Tara Singh. At first she refused, but eventually Ranjit Singh sent his forces and took over all her estates and property. She was kept in confinement until her death in 1832. The prince Sher Singh, lived in this town until his accession to Ranjit Singh's throne in January 1841.

Historical Note: The last camp of Alexander the Great before he began his return march is supposed to have been on the banks of the Beas river near Batala. Alexander's men are still remembered as bara gazy, or 12-ft-tall, because of the enormous graves and alters of hewn stones that were left by his armies (Ibetson, 1919).

Another version of the founding of Batala: The small town of Batala is situated at a distance of about 32 kilometers from the famous city of Amritsar on the way to Pathankot. Batala or Vatala is believed to have been founded by a Rajput king Ram Dev Bhatti. He thought of laying a foundation stone of the town about half-a-mile away from where it is now situated. A very interesting legend connected with this has been related by the succeeding generations. It is said the day when the foundation stone was to be laid, a special ceremony was to be performed at a particular time. The king’s men placed a bundle containing some ritual articles on the ceremonial site. However, shortly before the ceremony, all of a sudden, a dog came and picked up the bundle in its mouth and ran away. The attendants chased the dog who dropped the bundle on a small hilltop and vanished. There upon the king decided to perform the ceremony at the site where the dog had dropped the bundle, and now the Batala fort is situated there. The name of the town Vatala or Batala literally means ‘exchange’ in the local dialect. But in this context, it meant change of sites.

In the 19th century, there lived two eminent families, the Bhandaris and the Puris, whose contribution to the cultural life is immense. Kishan Chand Bhandari occupied a very high position as an envoy of Maharaja Ranjit Singh. He built a temple in Batala which is elaborately decorated with mural paintings on interior and exterior of the building.

Yet, another version of founding of Batala: Batala is stated to have been founded in 1465 A.D., but in reality its age is far greater. Ram Deo first dug the foundations of the new town 2 miles from the first site, but every night the excavation was filled by supernatural fires and Ram Deo was compelled to change the site of the town, which he called Batala or change. Ram Deo Bhatti was the founder of Batala.