There was a village named Khadki (Khadki) where the city stands today. According to some historians, the city was founded in 1610 by Malik Ambar. Malik Ambar was the Prime Minister of Murtaza Nizam Shah II of Ahmednagar, the then ruler of the Deccan (central parts of Southern India). It is widely believed that city took shape between 1604 and 1610 under Malik Ambar's rule. Initially, it was named Fatehpura (city of Victory), probably after Malik's son Fateh Khan.

In 1634, Aurangzeb was sent to Khadki as Governor of Deccan. In 1644, he moved to Agra to play an active role in Mughal politics.

In 1681, the city again became the residence of Aurangzeb, who had now become Mughal Emperor. He used the city as a base for his campaigns to conquer the last remaining Deccan sultanates until his death in 1707 AD. The modern name of the city was probably taken during his period. Aurangzeb's tomb is situated at Khultabad, a small town near the city which is also known as Saints valley.

The important places in and around Aurangabad include Bibi ka Maqbara(A replica Of the Taj Maghal), Ellora Caves, Aurangabad Caves, Ajanta Caves, Ghrishneshwar Temple ,Khultabad Ford, Daulatabad Fort and Dr. Babasaheb Ambedkar University

So strategic is its location at the cross roads of north and south India, that Mohammed-bin-Tughlak and Aurangzeb, two powerful kings attempted to translocate their capital from Delhi to Aurangabad. Their vision was clear, from Aurangabad, they would be better able to control both northern and southern regions of their empires. The fact they failed should not be attributed to the inherent flaws in their scheme as it should on the less evident fact that their empires were crumbling.