After seven days and seven nights of fighting, Midoriko realized that she would be unable to fight off the yōkai, and as she was drawn into the creature's massive jaws, she seized Magatsuhi's spirit and bound it within her own with the last of her power, killing both of them and creating the Shikon Jewel, which burst from her chest (in the manga, her heart burst out along with it.) Within the jewel, her soul and Magatsuhi still battle on, while their corpses were mummified and relocated to a cave near the taijiya village. The state of their battle is influenced by the person who possesses the jewel.
The jewel was controlled by various humans and yōkai for several centuries until it ended up being rediscovered by Sango's grandfather. Before the series begins, the yōkai taijiya (demon exterminators) entrust Kikyo with the guardianship of the jewel due to her purifying powers, but it leads to her untimely demise. Naraku deceives Kikyo and InuYasha, who had fallen in love with her, into hating each other by making them believe they had betrayed one another. The purpose of his plan is to steal the jewel and corrupt it with their hatred and bitterness. InuYasha is sealed to a tree for fifty years, and Kikyo is killed by Naraku, although she believes InuYasha is responsible for her death.
An episode in the anime series suggests this fate is due to a curse from Tsubaki that would cause Kikyo, should she ever fall in love, to lose her powers as a miko and have an unnatural death, though the actual canonity of this event is disputable as this is not present in the original manga.
The jewel was burned with Kikyo but returned five hundred and fifty years later through a reincarnation of Kikyo's soul in Kagome, coming back from the future because of the jewel's power and the interference of the yōkai Mistress Centipede (Mukade Jōrō). Kagome eventually unsealed InuYasha, however, the jewel was lost to a carrion crow. While attempting to retrieve it by shooting the crow with an arrow, Kagome accidentally shatters the jewel into hundreds of shards (Shikon no Kakera) which scatter themselves across Japan. InuYasha's group (which includes Miroku, Kagome, Shippo,Sango and Kirara) attempted to collect the shards and stop Naraku from getting the jewel for himself. However, eventually the complete jewel was reassembled by Naraku.
Magatsuhi was able to temporarilly escape the jewel and compose a body through Naraku, but was quickly destroyed by Sesshomaru. It is revealed that Magatsuhi sealed Kagome's true power out of fear that she could purify the jewel. So long as his spirit remained outside of the jewel, her power would never return. He is eventually destroyed when the group enter Naraku's body, giving back Kagome her spiritual powers.
Before Naraku died, he made a wish on the jewel that was the 'wish of the Shikon no Tama itself,' that Kagome replace the Midoriko and Naraku replace Magatsuhi. InuYasha, having entered the Shikon Jewel through a Meido to rescue Kagome, was told by Magatsuhi he will be completely free as a result of Kagome making a wish to return home. However, Inuyasha cuts the point of light in the darkness inside the jewel with Meidou Zangetsuha so Naraku and Magatsuhi were finally defeated. When Inuyasha arrives in the Meido outside the jewel to save Kagome, she makes the right wish: for the Shikon No Tama to disappear, which destroys the jewel.
In her first appearance, Kagura creates a counterfeit Shikon Jewel, which she tricks Koga into implanting into himself. This "jewel" fills Koga's body with poisonous vapors and nearly kills him before Kagome is able to pierce through the demonic energy with her arrow.