Neolithic tools found in the Kathmandu Valley indicate that people have been living in the Himalayan region for at least nine thousand years. It appears that people who were probably of Tibeto-Burman ethnicity lived in Nepal two and half thousand years ago.

Indo-Aryan tribes entered the valley around 1500 BCE. By late eleventh century, southern Nepal came under the influence of the Chalukya Empire of southern India. Under the Chalukyas, Nepal's religious establishment changed as the kings patronised Hinduism instead of the Buddhism prevailing at that time.

Hindu temples in Patan, the capital of one of the three medieval Newar kingdoms. By the early thirteenth century, leaders were emerging whose names ended with the Sanskrit suffix malla ("wrestler"). Initially their reign was marked by upheaval, but the kings consolidated their power over the next two hundred years. By late fourteenth century, much of the country began to come under a unified rule. This unity was short-lived; in 1482 the kingdom was carved into three areas, Kathmandu, Patan, and Bhadgaon, which engaged in petty rivalry for centuries.

The Gorkha ruler Prithvi Narayan Shah set out to unify the kingdoms, after first seeking arms and aid from Indian kings and buying the neutrality of bordering Indian kingdoms. After several bloody battles and sieges, he managed to unify Nepal three years later. However, the actual war never took place while conquering the Kathmandu Valley. Prithivi Narayan Shah was unable to defeat the powerful Newar kingdom of Kathmandu. In fact, it was during the Indra Jaatra, when all the valley citizens were celebrating the festival, Prithvi Narayan Shah with his troops captured the valley, virtually without any effort. This marked the birth of the modern nation of Nepal. A dispute and subsequent war with Tibet over control of mountain passes forced Nepal to retreat and pay heavy repatriations to China, who came to Tibet's rescue.

Factionalism among the royal family led to instability after the war. Armed clashes between military personnel and administrators loyal to the queen led to the execution of several hundred princes and chieftains around the country. Bahadur won and founded the Rana dynasty, leading to the Rana autocracy. The king was made a titular figure, and the post of Prime Minister was made powerful and hereditary. The Ranas were staunchly pro-British, and assisted the British during the Sepoy Rebellion in 1857, and later in both World Wars.