The Sansthan was established in 15th October, 1970 as an autonomous organisation registered under the Societies Registration Act, 1860 (Act XXI of 1860) for the development and promotion of Sanskrit all over the country. It is fully funded by Government of India. It functions as an apex body for propagation and development of Sanskrit and assists the Ministry of Human Resource Development in formulating and implementing various plans and schemes for the development of Sanskrit studies. It has assumed the role of a nodal body for the effective implementation of various recommendations made by the Sanskrit Commission set up by the Government of India, Ministry of Education in 1956 to consider the propagation and development of Sanskrit language and education in all its aspects.

Sanskrit has played a vital role in the development of all Indian languages and in the preservation of the cultural heritage of India. No Indian language can flourish without the help of Sanskrit. Sanskrit also provides the theoretical foundation of ancient sciences. Hence, it becomes essential to preserve and propagate Sanskrit for all-round development of India. Fully conscious of this responsibility, the Govt. of India, in pursuance of the recommendations of the Sanskrit Commission (1956-57) constituted a Central Sanskrit Board, which recommended the establishment of a Rashtriya Sanskrit Sansthan. Accordingly, the Rashtriya Sanskrit Sansthan was established in October 1970 as an autonomous organisation registered under the Societies Registration Act, 1860 for the development, preservation and promotion of Sanskrit learning all over the country and abroad. The Sansthan is fully financed by the Government of India and works as a vital agency of the Central Government.