Bhuj, a flourishing walled city is the most important town in the Kutch area. Bhuj was the capital of the former state of Kutch and now it is the headquarters of the Kutch district. Bhuj was chosen by Rao Khengarji I as his capital in 1549. This city was greatly destroyed in the earthquake in 1819 and 2001. Bhuj derives its name from the Bhujiyo Dungar, a hill, that overlooks the present Bhuj town. Bhuj is situated at the base of the fortified hill and partly round the lake. Bhuj has also been described as the Jaisalmer of Gujarat and is also very much similar like Bundi in Rajasthan. Within the walls there is maze of enticing alleyways and many examples of fine Gujarati architecture, exuberant temple decoration and colourful inhabitants. This place is a paradise of handicrafts and lifestyle lovers. There are some villages in Bhuj which are rich in craft and culture. Embroidery is the most important handicraft in this region.

Bhuj was the capital of the former princely state of Kutch till 1947 AD. The Rajput rulers of Kutch came from Sindh in the late 15th century and settled at Bhuj. Rao Khengarji I chose the strategic location at the base of Bhujiyo Dungar and founded the city of Bhuj in 1548 AD. The need for better security arose only after the decline of Mughal power. In 1723 AD, Rao Godiji constructed the massive fort with gates and 11 meter thick masonry wall, surround the whole town. The city wall was also armed with fifty one guns. The British took over the fort in 1819 AD and acted as peacemaker between the Kutch rulers and Bhayad Jagirdars. The treaty with the British resulted in peaceful period in the history of Kutch and the state thus became prosperous with surplus funds, enabling the rulers to undertake public and royal building projects. Rao Pragmalji, who ruled Kutch from 1860 to 1876 AD also undertook various projects like the improvement of Mandvi harbour, construction of roads and irrigation works, hospitals, schools and jail. He also built the Prag Mahal and Ranjit Vilas Palace at Bhuj and Vijay Vilas Palace at Mandvi.