Originally established in 1867 as a wooden building near the banks of Sungai Budor, the mosque was relocated to its current site to escape frequent flooding. In 1921, the state began a massive project to upgrade the structure from timber to concrete. It was officially inaugurated and named Masjid Muhammadi on July 31, 1931, by Sultan Ismail in honor of his father, Sultan Muhammad IV. Beyond its architecture, the mosque is historically revered as a premier center for Islamic education in the region. It was the teaching ground for legendary scholars like Tok Kenali, and its system was modeled after the teaching circles in Mecca. This reputation earned Kelantan the famous nickname "Serambi Mekah" (The Veranda of Mecca).