Until 1850, Sawantwadi was known as Sunderwadi. The name Sawantwadi came into the practice because of the surname of the state's ruling family of Khem-sawants. The palace was earlier located on Narendra hill. Khemsawant III constructed the existing palace in late 18th century (1755–1803), and Moti-Talao (Talao-lake) was built in front in 1874.
Sawantwadi is known for its wooden toys and models thanks to an active woodcraft industry. It is also becoming a major tourist attraction.
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