Dagshai is one of oldest cantonments in India. It is situated on top of a 5689 feet (1734 mtr) high hillock that stands sphinx-like astride the Kalka-Shimla Highway at a point about 11 km from Solan. It was founded in 1847 by the East India Company by securing free of cost five villages from Maharaja of Patiala aka Bhupinder Singh of Patiala. The name of these villages were Dabbi, Badhtiala, Chunawad, Jawag and Dagshai.
The new cantonment was named after the last named village, as it was the largest and most strategically located. The name Dagshai, according to a popular local legend was derived from Daag-E-Shahi. During the Mughal times a Daag-e-Shahi (Royal Mark) was put on the forehead of the criminals and sent packing to the then Dagshai village. The Dagshai Central Jail now being used as office, recently converted into a museum was built in 1849. This jail came into limelight when a number of Irish freedom fighters were executed here, prompting Mahatma Gandhi to rush to assess the situation. Four revolutionaries of Kamagata Maru were also executed at Dagshai. Presently this jail is being maintained by MES under GE S/H Kasauli. Now it has been converted into museum. Going around Dagshai, one can still see the remnants of the European Regiments that served here. The two churches and three cemeteries are mute testimonies of the time gone by.