 National Highway NH139 which connects Rajhara town of Palamu district to Patna passes through the town.Daudnagar was founded by Daud Khan, a Governor of Bihar under Aurangzeb in the 17th of Palamu fort from the Cheros; and it is said that while back from this conquest he camped here and founded the town known after him.The surrounding area was also granted to him as a Jagir by the emperor.