The history of this institute dates back to 1795 A.D. when the Lunatic Asylum was established in Munghyr near the court premises south of the Ganges River. It was shifted to Patna in November 1821 and was located at Patna Collegiate School. Subsequently the Lunatic Asylum was shifted to present location at Kanke, Ranchi in the last week of April 1925.

Nomenclature of Lunatic Asylum was changed to Indian Mental Hospital (IMH). Captain J.E. Dhanjibhay was the first Superintendent of IMH. The male wing started functioning on 4th September 1925 with 110 patients. The female wing started functioning with 53 patients on 19th September 1925. Gradually patients from Dacca (Bangladesh) and Berhampur (Orissa) were transferred here. There were 1226 patients on 31st December 1925.