The karambit was originally an agricultural implement designed to rake roots, gather threshing, and plant rice in most of island Southeast Asia. It's a smaller variant of the Southeast Asian sickles (Indonesian celurit, arit, or sabit; Filipino garab and karit; and Malaysian sabit). It still possesses many efficient uses for the modern laborer, allowing use of the blade for utility work, with the finger ring eliminating the need to put the knife down between operations, if use of the fingers to manipulate the object to be worked on is required (such as the action of cutting and opening a shipping box, or removing plastic wrap from shipments, in two very basic examples). The finger ring also provides an added degree of protection against dropping the knife during use, which is particularly essential in work environments that include heavy machinery, into which dropping a handheld, metal tool of any kind can cause massive damage to the equipment and those around it, especially if the tool is ejected at high velocity from rotating components. The karambit is believed to have originally been weaponized among the Minangkabau people of West Sumatra where, according to folklore, it was inspired by the claws of a tiger. As it was weaponized, the blade became more curved to maximize cutting potential. Through Indonesia's trade network and close contact with neighboring countries, the weaponization of the karambit was eventually dispersed through what are now Malaysia, the Philippines, Thailand, Cambodia, Laos, and Myanmar.

European accounts tell that soldiers in Indonesia were armed with a kris at their waist or back and a spear in their hands, while the karambit was used as a last resort when the fighter's other weapons were lost in battle. The renowned Bugis warriors of Sulawesi were famous for their embrace of the karambit. Today it is one of the main weapons of silat and is commonly used in Filipino martial arts as well.

The karambit is held with the blade pointing downward from the bottom of the fist, usually curving forwards. While it is primarily used in a slashing or hooking motion, karambit with a finger ring are also used in a punching motion, hitting the opponent with the finger ring. Some karambit are designed to be used in a hammering motion. This flexibility of striking methods is what makes it useful in self-defense situations. The finger guard makes it difficult to disarm and allows the knife to be maneuvered in the fingers without losing one's grip

The short Filipino karambit has found some favor in the West because such proponents allege the biomechanics of the weapon allow for more powerful cutting strokes and painful "ripping" wounds, and because its usability is hypothesized as more intuitive, but more difficult to master than a classic knife.