The NSDF was established in 1998 under the Charitable Endowments Act, 1890. It is funded by donations from the public and private sectors, Non-Resident Indians (NRIs), and charities or non-profits, with contributions from the Government.

The fund is governed by a Council headed by the Union Sports Minister — currently Mansukh Mandaviya. The Council also includes top office-bearers from Public Sector Undertakings, which are the biggest donors to the NSDF, industry bodies like FICCI and CII, private-sector representatives and sports ministry officials.

Its current members are: Sports Minister Mansukh Mandaviya (Chairperson); MoS Sports Raksha Khadse (Vice-Chairperson); Sports Secretary Hari Ranjan Rao, who is also Sports Authority of India (SAI) DG; Additional Secretary and financial advisor to sports ministry; representatives from Railway Sports Promotion Board and All India Police Sports Control Board; CMDs or MDs of The New India Assurance Co Ltd, Indian Oil Corporation Ltd, ONGC Foundation, REC Foundation and NTPC Foundation; and, a Sports Ministry joint secretary.

Day-to-day operations and grant approvals are handled by a six-member executive committee chaired by the Sports Secretary. Its other members are SAI Director General, SAI Executive Director (Teams), Financial Advisor to Sports Ministry, a Sports Ministry Joint Secretary and a Sports Ministry Director.

Athletes and organisations seeking NSDF funds must submit a prescribed application form along with a detailed project report. The application is submitted to the SAI and the concerned national sports federation, who are required to present their comments within 15 days of receiving the proposal.