In March 1698, when Guru Sahib summoned all the Masands at Anandpur Sahib, they were tried here. This shrine is a part of the erstwhile Guru De Mahal complex.By the side of this building, an old well, from the time of Guru Sahib, still exists. The Masands who had been found guilty were punished here. Gurudwara Damdama Sahib stands, along with Thara Sahib and Bhora Sahib in the same compound, close to Sis Ganj, formerly called Guru ke Mahal, i.e. residential quarters of Guru Tegh Bahadur.
Damdama Sahib marks the site where the Guru used to sit while receiving and addressing visiting sangats. The ceremony of installing Guru Gobind Singh as Guru was performed here. The present domed octagonal building was constructed during the early decades of the 20th century.