The name of the city is derived from Goddess of power known as Shri Chandika whose temple is on Chandigarh-Kalka Road. The temple is known by the name of Chandi Mandir. It is considered to be an ancient site and has a major religious significance for Hindus.

After India's independence from British rule Punjab became a state without a capital. Though there was a temporary secretariat at Shimla in Himachal Pradesh, the political leadership decided on the construction of a modern and accessible capital. This was Pandit Jawaharlal Nehru's Dream City of modern India. The city was named as Chandigarh. This is the first planned city of India.

The responsibility for the design was given to the French architect Le Corbusier or the Crow. With the help of his cousin Pierre Jeanneret, and that of the English couple Maxwell Fry and Jane Drew (alongwith a number of Indian architects prominent amongst them Chief planner Narinder S. Lamba & Chief Engineer J.C. Verma) Chandigarh, the present capital, came into existence at the foothills of the Shivaliks (the first of three parallel chains of the Himalayas).

It was built in 1953 and  serves as the capital of two states, i.e. Punjab and Haryana. It is administered by the Central Government and is hence classified as an Union Territory. Since 1986 there has been much talk about officially handling it to Punjab on the basis of demography. The issue however continues to be a matter of discussion with many political disputes.