Karnal was founded by the Kauravas of the Mahabharata for the hero of that era Karna. He was the step brother of the Pandavas (the eldest son of Kunti, who abandoned him as she was not married then) and had supported the Kauravas as he was not welcomed by the Pandavas. Karnal was also known as the 'city of Daanvir Karan'. (Daanvir means large hearted). The town once had a fort and was surrounded by a huge boundary wall, none of which exist today.

Karnal was under the Mughal rule until the year 1739, when the Persian King Nadir Shah defeated the Mughal ruler Muhammad Shah in the Battle of Karnal on February 13, 1739. Nadir Shah won over Muhammad Shah’s force in merely three hours of battle. This was the beginning of the Persian rule which aimed at moving towards Delhi. The Mughals fought bravely but were unable to face the Persian guns. Almost 30,000 Mughal soldiers died in the war. Nadir Shah left India in May 1739 and the treasure looted by him from India was so much that he stopped collecting any tax in Iran for three years after he returned to Iran.

Following this, Karnal was ruled by the Raja Gopal Singh of Jind in AD 1763 and was finally conquered by the British-Irish military commander George Thomas in 1797. The area was confiscated by the British in the early 18th century.

The fort at Karnal that was built by Raja Gajpat Singh of Jind was taken over by the British. They used the fort as the home for Dost Mohammad Khan, Amir of Kabul. The fort was used differently by them as a jail, as the place of residence for the local soldiers and as a poor house. In 1862, it was handed over to the Educational Department who shifted district school here.

In 1811, the British established a cantonment in Karnal which was moved to Ambala thirty years later due to the outbreak of malaria.

Karnal is famous for manufacturing of shoes, agriculture research institutions and Basmati Rice.