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The history of the mental health care system in Karnataka dates back to the colonial times. In the18th century, the legendary warrior Tipu Sultan was killed by the British and power was handed back to the Wodeyar clan. A British army regiment was stationed in Bangalore, which was then part of the princely state of Mysore. During the period, especially from 1831-1881, under the administration of British Commissioner Sir Mark Cubbon, the region witnessed a lot of developments in the healthcare system. Western medicine was introduced and hospitals/dispensaries were opened for the care of British infantry, Indian soldiers and civilians.

The Bangalore Lunatic Asylum was founded in 1847. Dr. Charles Irwing Smith, a British medical practitioner in Bangalore, played a pivotal role in the establishment of the asylum. The simple yet airy structured asylum with 50 beds was located at Pete or Pettah , Dharmambudi tank area (the present State Bank of Mysore head office building at the intersection of Kempegowda Road and Avenue Road, Bangalore).

At the asylum, the mentally-ill were allowed to move freely on the premises and were provided with opportunities to take part in activities like rope-making, gardening, cleaning, and other domestic works. In the ensuing years, doctors from Indian Medical Service were appointed and the number of patients at the asylum began to rise. By 1914, about 100 patients were admitted and discharged, on an average, every year.

In 1925, the asylum was rechristened Mental Hospital signifying a paradigm shift in management of mental problems. The old asylum / mental hospital on Avenue Road was closed in 1936-37, and the staff and patients moved to the new site Lakkasandra, the second highest hillock in Bangalore.

More than 100 acres of land was donated by the Maharaja of Mysore to establish the Mental Hospital. Dr. Frank Xavier Noronha became the first superintendent of the Mental Hospital. At this time (in 1936), Sir Mirza Ismail held the coveted position of the Dewan of Mysore. This period was billed as the golden age of Mysore. Both Sir Ismail and Dr. Noronha were keen gardeners and avid horticulturists. Their common passion for well-designed public spaces led to the formation of a new structure for the Mental Hospital encompassing vibrant gardens replete with lush landscapes and open spaces. The duo personally planted many of the exotic tree species that can still be seen on the campus.

The new building itself was loosely based on the plans of the Institute of Psychiatry building, which was then housed at the Bethlem hospital site in Moorfields (United Kingdom). It was constructed by the civil engineering firm, the Mysore Engineering Company (MEC), which was staffed entirely by Indian engineers. It was considered essential that the spaces in an asylum provide an environment conducive for recovery, and this principle lay at the root of asylum design, where where one could be both mad and safe.

This careful consideration to a healing environment contrasted sharply with other asylums in India, which were often hand-me-downs from jails or barracks. This building, and the Hospital for Europeans and Indians in Ranchi, were the only two custom-built asylums in British India in the early 20th century, and were designed with the explicit purpose of providing a healing environment, and with all the necessary modern attributes.

Dr. Noronha, after his retirement, was succeeded by Dr. MV Govindaswamy who was a trained doctor in the Mysore Medical Service with BSc (Chemistry) and MA (Psychology) degrees. When Dr. Govindaswamy joined as the medical superintendent of the Mysore State Mental Hospital, he was faced with the challenge of developing the mental hospital into a open, model mental health care institution. Dr. Govindaswamy successfully transformed the hospital into a modern institute of mental health and neuro sciences, which further went on to become the leading and first-of-its-kind training and research centre in India.

In 1946, the Health Survey and Development Committee (also known as the Bhore Committee being under the Chairmanship of Sir JoesphBhore) reviewed the state of mental health in India and recognized the paramount need for the production of an adequate number of medical and auxillary personnel trained in various aspects of mental health. The Committee recommended that all the professionals employed in mental health work should possess a recognized Diploma in Psychological Medicine. The committee also opined that the expansion of mental health services could be carried out only if there were simultaneous intensive training programmes.

The State Government Mental Hospital, Bangalore, which had already built up certain traditions since 1938 in terms of under-graduate and graduate teaching in the field of Psychiatry was chosen as the centre of training by the Government of India. It became the first postgraduate training institute in psychiatry for the country.

Dr. MV Govindaswamy, played a vital role in the formation of the AIIMH and became its founder-director. Academic activities and courses in Psychiatry, Clinical Psychology and Psychiatry were introduced. He kept pace with all the developments in the global mental health scenario and ensured that all important forms of treatment introduced in major developed countries was brought to India. He was also successful in blending Indian psychology with philosophy to understand human behaviour better.