Davanagere was originally an obscure village, forming one of the suburbs of Bettur. Sultan Hyder Ali gave it as jagir to a Marathachief named Apoji Ram, who encouraged merchants to settle there. While Apoji Ram died without heirs, the place continued to grow, favored by Tipu Sultan. After the fall of Tipu Sultan's regime, a European firm stepped in and started a cotton mill. These mills flourished as cotton was grown in plenty, in and around Davanagere, as well as the adjacent town of Harihar. Climatic conditions and the nature of the soil (black gypsum) favoured its growth. Davanagere Cotton Mills is now a well-known name in the region
