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Dagshai is one of the oldest cantonment towns in the Solan district of Himachal Pradesh. It is situated on top of a 5689 feet (1734 mtr) high hillock that stands sphinx-like astride the Kalka-Shimla Highway at a point about 11 km from Solan. It was founded in 1847 by the East India Company by securing free of cost five villages from Maharaja of Patiala aka Bhupinder Singh of Patiala. The name of these villages were Dabbi, Badhtiala, Chunawad, Jawag and Dagshai. The new cantonment was named after the last named village, as it was the largest and most strategically located.

The name Dagshai, according to a popular local legend was derived from Daag-e-Shahi. During the Moghul times a Daag-e-Shahi (royal mark) was put on the forehead of the criminals and sent packing to the then Dagshai village.

At present total area of the cantonment is 821.7793  acres. As per census of 2011 the total population of the Cantonment is 2,904. Dagshai Cantonment Board is categorized as Class III Cantonment and comprises of 12 members giving an equal representation to Elected and official members.