The rupee on Tuesday breached the 66-mark against the dollar for the first time in history and quoted at 66.06 at mid-session.
The Indian currency declined amid weak local equities and demand for the dollar from importers and banks.
A strong US currency overseas and capital outflows also weighed on the rupee.
The rupee opened lower at 65 from yesterday's close of 64.30 and continued to slide to 66.06, down by 176 paise.
It quoted at 65.97 against the dollar at 1400 hours. The previous lifetime low of 65.56 was reached on August 22.
Month-end dollar demand from importers, mainly oil refiners, and some banks on behalf of their clients put pressure on the rupee.
Dealers said the Food Security Bill, which was passed by the Lok Sabha on Monday, has raised fears that the government might face a higher subsidy burden.
Finance Minister P Chidambaram said in New Delhi on Monday that the currency is undervalued and hoped it will find its appropriate level.
Chidambaram also said the fiscal deficit will be contained at 4.8 per cent of GDP even after doling out subsidies to implement the Food Security Bill.
The benchmark S~~amp;amp;P BSE Sensex stock index was down by more than 575 points in afternoon. Foreign institutional investors pulled out a net Rs 607.43 crore of stocks yesterday, as per provisional data with the exchanges.
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