The temple dates to the 12th century, attributed to Ballal Sen, a king of the Sena dynasty who ruled Bengal around 1100 AD. The founding story involves a dream. Ballal Sen reportedly saw the deity Dhakeshwari concealed beneath jungle growth, ordered the vegetation cleared, and built a temple to house what he had uncovered. Another tradition holds that his mother, the queen of Bijoy Sen, gave birth to Ballal at Langolbond while returning from a bath, and the temple was built to glorify that birthplace. The temple is classified as one of the Shakta pithas, the goddess-centric shrines scattered across the Indian subcontinent, marking the spot where the jewel from the crown of the goddess Sati is said to have fallen. That gem has been lost for centuries. The original 900-year-old murti was relocated to Kumartuli in Kolkata during the Partition of India, carried there by the chief priest alongside millions of Bengali Hindu refugees fleeing East Bengal.

The temple compound contains two distinct architectural traditions. The older Pancharatna structure dedicated to Durga has lost its original appearance through repeated renovation, making it impossible to date by style alone. Four Shiva temples stand nearby, each housing a Shiva linga. Oral tradition attributes them to King Man Singh in the 16th century, though historians consider this unreliable. Scholar Ratan Lal Chakraborti noted that the main structure resembles a Buddhist pagoda, leading him to speculate the temple may predate the Sena dynasty entirely, possibly originating in the 10th century. The interior is dark, as in many ancient Bengali temples, and light must be arranged to see the deity. Nineteenth-century descriptions paint a compound overgrown with jungle, bounded by Urdu Road to the north and Mirpur Road to the southwest, with an old pond and a nahobottola gate once wide enough for elephants to pass through.

The temple's modern history is inseparable from the political convulsions that shaped Bangladesh. During the 1971 Liberation War, the Pakistan Army seized the main worship hall and used it to store ammunition. Over half the temple's buildings were destroyed. Several custodians were tortured and killed, though the head priest and most staff escaped to India. The Vested Property Act and government confiscation claimed significant portions of the temple's historic land. In December 1992, mobs attacked the complex in apparent retaliation for the destruction of the Babri Masjid in India. Through all of this, the temple endured. In 1996, it was renamed Dhakeshwari Jatiya Mandir, the National Temple, after sustained campaigning by Hindu groups who sought official recognition for their primary place of worship following the declaration of Islam as the state religion in 1988.

Each year, the largest Durga Puja celebration in Dhaka unfolds at the National Temple. The president, prime minister, opposition leaders, and members of parliament visit to congratulate the Bangladeshi Hindu community. Several thousand worshippers stream through the premises over the five-day festival, receiving prasad of rice and lentils. The Janmashtami procession, marking Lord Krishna's birthday, starts from Dhakeshwari Temple and winds through the streets of Old Dhaka. That tradition dates to 1902, was forcibly stopped in 1948 after Pakistan's establishment, and resumed in 1989. Indian Prime Minister Narendra Modi prayed at the temple during his 2015 visit to Bangladesh and received a model of the goddess from the temple authorities. Beyond the major festivals, the compound hosts blood drives, inoculation programs, concerts, and flood relief efforts open to all residents of Dhaka, Hindu and Muslim alike. The temple that may have named the city continues to serve it.