Situated on the eastern end of the Dal Lake, Nishat Garden is the second-largest Mughal garden in the Kashmir Valley, with the Zabarwan mountain range forming an idyllic backdrop. Nishat Bagh or Garden of Joy was designed and built by Asif Khan, the elder brother of Mughal queen Noor Jahan, in 1633.

There is an interesting story about the jealousy of Mughal emperor Shah Jahan who appreciated the beauty as well as the grandeur of this garden after he saw it for the first time. It is said that he articulated the admiration level three-fold, hoping Asif Khan would gift it to him. But when there was no offer from Asif Khan, Shah Jahan ordered the water supply to the garden to be stopped. The garden apparently remained deserted for some time, which left Asif Khan heartbroken. One day when he was resting under a tree, one of his loyal servants turned on the water supply source from Shalimar Bagh. Fearing the wrath of Shah Jahan for the disobedience of his orders, Asif Khan immediately ordered the water supply to be stopped. However, Shah Jahan, on hearing about this courageous act by Khan's servant, did not punish him. In fact, he appreciated the servant for his loyal service to his master and ordered full restoration of the water supply. As far as the architecture of Nishat Bagh is concerned, the layout of the garden is based on the basic concept of Persian gardens.