Ahilyabai was born on 31 May 1725, in village of Chaundi (present-day Ahmednagar district of Maharashtra) to Mankoji Shinde who was the Patil or head of the village. Women were not allowed to read or write at that time, but her father taught her to read and write. While she was not from any royal lineage, it was by luck she became the queen of Malwa. She was spotted by the King of Malwa, Malhar Rao Holkar, who was living in Chaundi village, to put the Nizams soldiers off track. While he was passing by the Shiva temple of the village, he saw eight-year-old Ahilya doing service at the temple. Seeing her strong character and charity, he asked her hand in marriage for his son Khande Rao Holkar. In 1773, she was married to Khanderao Holkar, at the age the of 8, as were the customs at that time. A son, Male Rao and a daughter, Muktabai was born to them. She got her pillar of support in her father-in-law, who made her very competent in running the state by giving her knowledge about statecraft. But happiness in her family life was short lived. Her husband was killed in battle of Kumbher by a cannon ball in 1754. Then her father-in-law, Malhar Rao Holkar, died in 1766, and on 5 April 1767, her son, Male Rao, also died. But she remained undeterred. She wrote a letter to the Peshwa, for taking the administration into her own hands.

She ascended the throne of Indore on 11 December 1767 and her brother-in-law, Tukoji Rao Holkar II was made the military commander. This was the beginning of a golden chapter in the history of Malwa. While there was some opposition to her ruling the state, but Holkar army stood by her side. Her accomplishments as the ruler of the state were:

· Developing Indore as city

· Making Maheshwar as the melting pot of Literary, artistic, musical and industrial achievements.

· Building various temples, roads, and other basic facilities in various parts of India.

· Re-developing Kashi, Gaya, Somnath, Ayodhya, Mathura, Kanchi, Avanti, Badrinarayan, Rameshwar, and Jagannath Puri.

· Patronizing Marathi poets like Moropant, Shahir Anantaphandi and Sanskrit scholar, Kushali Ram.

· Trade and agriculture flourished in her rule.

· Holding public court regularly to listen to the grievances of the people.

And many such accomplishments of her, which will take me, a year to write about. Yeah, I know, I am Samay but it will still take me time.

She had fought many battles and personally led her army to some but the most famous battle, happened to be between Raghunath Rao. It occurred after the death of Male Rao. Since Malerao died childless, a complex situation arose about an heir to the dynasty. Gangadhar Chandrachud, the divan of the Holkar state, had tried to take advantage of the situation. He hatched a scheme, in involvement with Raghunath Rao Peshwa. His idea was to release the queen of her entitlements, asking her to adopt a male child and he would act as a regent, looking after the affairs of the state. Raghunath Rao would receive handsome returns for his intervention and help from the army. This news reached her through Harkubai (Malharrao's fourth wife) and Udabai (Malharrao's daughter). Ahilyabai summoned her administrators. After consulting with her administrators, she sent an emissary to Madhav Rao Peshwa and summoned her commander, Tukoji Rao Holkar II and other commanders such as Dabhade, Bhosale and Scindia with their armies to protect Indore. Madhavrao Peshwa permitted Ahilyabai to protect her interests, no matter who she was fighting against. Tukojiraje immediately left for Indore with his army. Scindia and other commanders extended their support to Ahilyabai. Without a fear, Raghunath Rao still marched towards Indore with his army. Ahilyabai sent a message to him, which stated very tactfully that "...if you have decided to wage war against me, I will welcome you with my 500-strong women's army and will certainly defeat you. If you defeat me, it will be considered as a defeat of a woman against strong male army and none will laugh at me. But if I defeat you, you will have to save your face...the entire world will mock at you!" The message was enough for Raghunath Rao to understand the aftermaths of this venture as by now Tukoji had also arrived with his army. Raghunath Rao had to abandon this mission.

But she died of grief at the age of 70, on 13 August 1795, since her daughter, Muktabai had committed Sati on the pyre of her husband, Yashwant Rao Phanse.

She was, is and will be revered like a goddess by the people of the area who lived under her rule.