Kaila Devi is said to have appeared to a local sage named Kedargiri assuring him that she would come to the people of the area. Folklore has it that a yogi fleeing from Nagarkot, brought it with him on a bullock cart to save it from invaders. The bullock stopped in the central part of the hill amid the dense forest and refused to budge. By divine ordinance the statue was established at that very place where it remains to this day.

With the blessings of Kaila Devi, the Yaduvanshi rulers of Karauli have always maintained a deep connection with the temple.

Maharaja Gopal Singh Ji laid the foundation of the temple in 1723. He also established the statue of Chamunda Ji, bringing it from a cave near the fort of Gagron where it used to be worshipped by the Khinchi ruler Mukund Das Ji circa 1150.

Arjun Pal Ji built a large Kund, which exists to this date and was one of the earliest large-scale, man-made sources of water in the area.

Maharaja Bhawar Pal, coming to the throne in 1886, had the temple reconstructed with more modern architecture and had several facilities constructed for the pilgrims such as the Durga Sagar well. He also started the construction of the beautifully carved, Badi Dharmshala which was completed by Maharaja Bhom Pal in 1927, with a large scale electric power house. In 1947, Maharaja Ganesh Pal had both the interior and exterior of the temple refurbished in marble. The current Maharaja, Krishna Chandra Pal has also made several radical improvements and added multiple modern facilities, as well as starting the Kailadevi Senior Secondary School which provides high quality residential education at a nominal fee. New dharmshalas, Ram Bhavan and Kansal Bhavan have been built and some existing ones-Sita Bhavan, Ratan Devi and the Dholpur Dharamshala have been reconstructed.

In 2017, a project to ornament the dome of the temple in pure gold was completed. The blazing gold of the intricate dome make it one of the most striking pilgrimage sites in the country.

The Kaila Devi temple has a glorious past and with the blessings of Kaila Devi Ji herself and with the prayers of her worshippers, has an equally great presence in the future.,