There are several legends and stories linked to the origin of bandhani, ranging from a tale about a saint visiting a khatri dyer to a maidservant playfully adding knots to a plain cloth, or of dots appearing on a shawl dipped in turmeric. The tied cloth and the resulting dot design is what separates bandhani from other design techniques. These bandhani patterns have been documented in paintings, manuscripts and illustrations that provide hints of the age, uses and purpose of bandhani textiles over time. Whereas it is impossible to say when bandhani was first made, here are some early references from Indian history: 

• Fragments of Indian textiles excavated at Fostat in Egypt probably dating from the fifteenth century, were of bandhani pattern imitations made with printing blocks.

• Literary references by Ibn Batuta, a Moroccan traveler from the 14th century, describing a piece of silk as "a single piece of which was dyed in five colours" being sent to the Emperor of China from Muhammad Tughluq's court.

• Descriptions of the prince's sister's bridal odhani (veil) from Barra's Harshacharitra (606-648 AD), the history of King Harshavardan of Kannauj . The poet Agarwala writes that "old matrons were skilled in many sorts of textile patterning, some of which were in the process of being tied."

• Miniature paintings of women's muslin odhanis and Rajput kings' lahariya turbans from the 16th century.

“ Many years ago, a holy man went to a khatri's house, and as the story goes, the sadhu was doing his meditation (jap) and knots formed on the cloth that was meant to be dyed. The cloth was dyed just the way it was, and when the knots were opened, the pattern that emerged was beautiful, so the khatris paid attention to the way it was formed and then continued working on it. This was later known as bandhani. ”

- Aziz Khatri, Nakhatrana

Illustrations have been found on the Ajanta wall paintings (6th century) where maidservants are wearing blouses with visible tie-dye patterns: large bright dots and rings on almost transparent dark violet fabrics. In the Bagh caves, the depicted garments consist of a long-sleeved greenish yellow tunic decorated with a single white dot in circle motif. Illustrations also occur in Jain scriptures from the 12th century of women wearing tie-dye.

In Gujarat, the earliest surviving pieces of bandhani were fragments of silk bandhani used by Jain monks to interleave manuscript pages in the medieval period onwards, and in the 18th and early 19th centuries, tiedyed silk handkerchief known as “bandanna” were exported from Bengal to London by the English East India Company. These bandannas of Indian origin have made appearances in many British paintings from that time period.

The bandhani handkerchief was just one of many textiles that were exported from India to England during the British colonial rule. The settlers were awed by Indian textiles and techniques, and traders exported the bright colored tie-dye “rumals” to London from Bengal. These were available in cotton and silk, and used by the royals as well as common
classes. The English East India Company began ordering these scarves, or “bandannas” as they became known, in the late 1720s. Indian bandhani also traveled to other British colonies such as West Indies and East Africa.