During the Great War, most of the children from Mobotropolis were sent to the sanctuary of Knothole Village. When Dr. Robotnik betrayed the royal family and took over Mobotropolis, Knothole Village acted as the base of operations for the Original Freedom Fighters and later the Knothole Freedom Fighters, which was led by the king's daughter, Princess Sally Acorn. Robotnik made discovering its location one of his top priorities, as the Freedom Fighters acted as a thorn in his side for years.
Following the arrival of Robo Robotnik to Mobius Prime and his recapturing of Mobotropolis, the Mobian and Robian citizens fled to Knothole. Once there, King Max declared the formation of the Kingdom of Knothole to act as a safe haven for those opposed to Robo Robotnik's tyranny.
After Sonic's disappearance and presumed death as a result of the Xorda's attack on Mobius, Eggman formally declared war on both the Kingdom of Knothole and the Republic of Station Square. Knothole's location became known to the dictator, but over the course of a year, it became a bustling city and the new capital for the royal family. Forced to compete with Eggman's level of technology, Knothole featured a large amount of technology itself, including the Technolotree, the city's main means of global communication.
Dr. Eggman, tired of years of minor engagements with the Freedom Fighters and repeated failures, decided to destroy his enemies once and for all. He deployed his entire Egg Fleet and effectively wiped out all of Knothole via aerial bombardment, and all but five of its citizens were captured and transported to the Egg Grape Chambers. However, the combined efforts of Sonic, Tails, Knuckles, Amy and NICOLE resulted in their rescue. NICOLE then reprogrammed Eggman's weapons to transport all of the former Knothole dezians to the nanite city, now known as New Mobotropolis.