Amritsar
Guru Arjan's father Guru Ram Das founded the town named after him "Ramdaspur", around a large man-made water pool called "Ramdas Sarovar". Guru Arjan continued the infrastructure building effort of his father. The town expanded during the time of Guru Arjan, financed by donations and constructed by voluntary work. The pool area grew into a temple complex with the gurdwara Harmandir Sahib near the pool. Guru Arjan installed the scripture of Sikhism inside the new temple in 1604. The city that emerged is now known as Amritsar, and is the holiest pilgrimage site in Sikhism.

Continuing the efforts of Guru Ram Das, Guru Arjan established Amritsar as a primary Sikh pilgrimage destination. He wrote a voluminous amount of Sikh scripture including the popular Sukhmani Sahib. Guru Arjan is credited with completing many other infrastructure projects, such as water reservoirs called Santokhsar (lake of peace) and Gongsar (lake of Gongaga), founding the towns of Tarn Taran, Kartarpur and Hargobindpur.

Community expansion
While having completing the Harmandir Sahib with dasvand donations during the first decade of his guruship between 1581 and 1589, creating a rallying point for the community and a center for Sikh activity, and a place for the installment of the Adi Granth, Guru Arjan had also gone on a tour of Majha and Doaba in Punjab, where he would found the towns. Due to their central location in the Punjab heartland, the ranks of Sikhs would swell, especially among the Jatt peasantry, and create a level of prosperity for them; Guru Arjan would serve not only as a spiritual mentor but as a sovereign leader (sacchā pādshāh) for his followers in his own right.

Adi Granth
One of the Sikh community disputes following Guru Ram Das was the emergence of new hymns claiming to have been composed by Nanak. According to the faction led by Guru Arjan, these hymns were distorted and fake, with some blaming Prithi Chand and his Sikh faction for having composed and circulated them. The concern and the possibility of wrong propaganda, immoral teachings and inauthentic Gurbani led Guru Arjan to initiate a major effort to collect, study, approve and compile a written official scripture, and this he called Adi Granth, the first edition of the Sikh scripture by 1604.

The composition of both Prithi Chand and his followers have been preserved in the Mina texts of Sikhism, while the mainstream and larger Sikh tradition adopted the Guru Granth Sahib scripture that ultimately emerged from the initiative of Guru Arjan.

According to the Sikh tradition, Guru Arjan compiled the Adi Granth by collecting hymns of past Gurus from many places, then rejecting those that he considered as fakes or to be diverging from the teachings of the Gurus. His approved collection included hymns from the first four Gurus of Sikhism, those he composed, as well as 17 Hindu bards and 2 Muslim bards. The compilation was completed on August 30, 1604, according to the Sikh tradition and installed in the Harmandir Sahib temple on September 1, 1604.

Guru Arjan was a prolific poet and composed 2,218 hymns. More than half of the volume of Guru Granth Sahib and the largest collection of hymns has been composed by Guru Arjan. According to Christopher Shackle and Arvind-Pal Singh Mandair, Guru Arjan's compositions combined spiritual message in an "encyclopedic linguistic sophistication" with "Braj Bhasha forms and learned Sanskrit vocabulary".

After Guru Arjan completed and installed the Adi Granth in the Harimandir Sahib, Emperor Akbar was informed of the development with the allegation that it contained teachings hostile to Islam. He ordered a copy be brought to him. Guru Arjan sent him a copy on a thali (plate), with the following message that was later added to the expanded text:

In this thali (dish) you will find three things – truth, peace and contemplation:
in this too the nectar Name which is the support of all humanity.

— AG 1429, Translated by William Owen Cole and Piara Singh Sambhi
The Akbarnama by Abu'l-Fazl Allami mentions that Guru Arjan met the Mughal emperor Akbar and his cortege in 1598. According to Louis Fenech, this meeting likely influenced the development of Sikh manuscriptology and the later martial tradition.