During the later part of the 19th century the then Government of India initiated a great system of artificial irrigation through construction of canals. The area now comprising of Faisalabad District was part of three Districts via Gujranwala, Jhang and Sahiwal. This area was located between river Ravi and River Chenab and formed part of Rachna Doab.
The name Lyallpur was given with a view to pay tribute to Sir James Lyall, Lt. Governor of Punjab, for his services rendered in colonization of the lower Chenab valley. The design of the town was prepared by Captain Pophan Young C.I.E, a colonization officer.
In the same year i.e. 1896 Lyallpur Tehsil was established by carving out area of Gujranwala, Jhang and Sahiwal and placed under the administrative control of District Jhang.