The Nishan-e-Haider was established by the Government of Pakistan and named after Ali on 14 August 1947,[perlu rujukan] the year that Pakistan became a republic. It was applied retrospectively from the date of Pakistan's independence on 14 August 1947. It is Pakistan's highest award and takes precedence over all military and civil awards. Of the eleven Nishan-e-Haider recipients to date, ten have been from the Army and one from the Air Force.

Although some consider it equivalent to the British Victoria Cross and the United States Medal of Honor, it is unique in that it has so far been awarded only posthumously. At one point in time the Chief of Army Staff of Pakistan was asked why it was only awarded posthumously, his response reportedly that if it is awarded to a living person he may be involved in dishonourable conduct in the future which may disgrace the Award.