The team was officially formed on 13 March 1993 under the ownership of Ilhami Gashi. The club's first manager was Valdet Spahija and the first roster consisted of Valdet Spahija (as player-manager), Riza Gjakova, Ahmet Nimani, Besim Gjuka, Sebajdin Sylejmani, Agim Lluka, Agim Beqiraj and Turhan Zajmi.
The team name was KB Peja until 2001, when Ekrem Lluka bought the club and renamed it KB Dukagjini(Dukagjini is the company named after the region). In 2005 the name was changed back to KB Peja.[3]
In the 1996-97 season KB Peja played in the second division, due to problems with the Basketball Federation of Kosovo. In 2003-04, the team didn't compete in any league organized by the Basketball Federation of Kosovo.
In the 2016–17 season, Peja would play in a European competition for the first time, when the team entered the FIBA Europe Cup.[4][5]