Khunti is synonymous with rebellion and struggle since it was historically a center of activity during the famed Birsa movement in 1875. Ranchi district was organized into four administrative subdivisions namely sadar,Gumla (1902), Khunti (1905) and Simdega (1915). The place has been in recorded annals of history for its long drawn struggle against the British under the aegis of Birsa Munda, the revolutionary hero of Jharkhand. Khunti is famous as the lac producer of the Jharkhand region. A large share of India's total lac is produced in this place. Lac is a natural polymer (resin) that is produced by a tiny insect called Kerria lacca (Kerr). This insect is specially grown on the shoots of several species of trees such as palas, kusum and ber. This agricultural profession of lac cultivation is a secondary source of income for many tribal in the Khunti region. And it is with the Government assistance and many other voluntary and NGO's that this cultivation has taken a new form and a new lease of life.
According to Mazunda people tradition (The Munda are a Chota Nagpur Plateau region), King of Chhotangapur Maharaja Madra Munda's son Setea had eight sons. Of these eight greatgrandsons of Madra Munda, the eldest went southwards of Ranchi. He established a Khuntkatti village which he named Khunti.
When Mundas first went to Khunti and its neighborhood, they found that part of the country in the occupation of the Asuras and the Tirkis. When the Mundas with their stalwart physique appeared in the country, the Asuras and Tirkis got terribly frightened.It is asserted that Munda women of those times used to wear glittering jewelry weighing as much as ten seers each and the men could carry weights as much as many maunds. The Mundas to this day recite a couplet which describes how the Tirkis fled in trops when they saw the Mundas approach with their many ornaments sparkling in the sun. The Asuras went westwards to Basia, Pargana and Nagra.
In another story, it is said that the place derived its name from the mythological character Kunti in the Mahabharata. Kunti and her sons, the Pandavas, had spent some time in this place, during their fourteen years of anonymity. This ancient theory has brought fame and glory to Khunti.