There are various stories regarding its construction. According to one legend, Nawab Sadiq Muhammad Khan IV had the palace made for his wife; however, she was only there for one night, as she happened to see the adjoining graveyard from her balcony, and refused to spend another night there, and so it remained unused during his reign.

Noor Mehal is one of the hidden gems of Bahawalpur, since not many know about it.The palace is open to public. It is currently in possession of the army and is used as state guest house and for holding state durbars and meetings with foreign delegations.