At the outset, it should be mentioned that the history of ancient Nepal is primarily the history of the Kathmandu Valley. There are two reasons for this. One is the lack of historical records for other parts of Nepal and the other is that the colorful past of this beautiful valley easily outshines what is known about other areas. There is also the fact that the name of the country is taken from the name by which Kathmandu was known in earlier times - Nepal Valley.

The tale of Kathmandu Valley dates back to the time when the Gods communed with mortals. A glimpse into that period is found in the Buddhist chronicles that tells of the coming of the Bodhisattva Manjushree from China to worship Swayambhu. As the legend goes, Swayambhu, a manifestation of the Adhi Buddha, the primordial Buddha, was a brilliant flame emanating from a lotus flower that rested in the midst of the giant lake Nagarad. From atop distant Mandapgiri (now Nagarkot), Manjushree gazed at this wondrous sight and decided to worship this flame more closely. By going to the lowest hill in the southern part of the valley and slicing a portion of it with his Sword Of Wisdom, he drained the lake, thus creating the Chobhar Gorge (which still today drains the rivers of the Kathmandu Valley). The valley with its fertile soil appeared, and Manjushree proceeded on his mission to worship the Swayambhu, which had rested upon the small hillock of present-day Swayambhu.

Manjushree is then said to have founded the city of Manjupatan, which was located midway between Swayambhu and Gujeshwori (near what is today the Kathmandu airport), and proclaimed his disciple Dharmakarma as the ruler of that city. It was also during this era that Krakuchanda Buddha, Kanak Muni Buddha and Kashyapa Buddha visited the Kathmandu Valley to worship Swayambhu and Gujeshwori.
Aware that Kaliyug, the Dark Age, was drawing near, Kanak Muni Buddha sent Prachanda Deva, King of Gaur (Bengal), to cover the flaming image of Swayambhu since only such an act would preserve it from the gaze of the sin-ridden world. So, Prachanda Deva built a stupa encasing the sacred flame of Swayambhu.
Later, Prachanda Deva sent his son Shakti Deva to enthrone their cousin Gunakama Deva as King of Nepal. Gunakama’s reign saw a great famine afflict the kingdom but with aid from the Goddess Shantishree, he was able to overcome that disaster. The last king of this dynasty was Singhakhetu and, in his reign, the country flourished in both trade and commerce. It is said that the kingdom even conducted trade with places as far away as Singhaladeep (Sri Lanka).
The demise of Gunakama’s dynasty saw a succession of rulers from the provinces of India such as Bengal and even from as far as Madras rule Kathmandu. The most renowned was Dharmadutta of Kanchipuram who is said to have built the Pashupatinath Temple. Boudhanath may have been built by Dharmadutta’s second successor.
Then came the Ahir or Abhir Dynasty who were a race of cowherds. There were eight kings in this line, the first being Bhuktaman and the last Yaksha Gupta. Owing to pastoral disputes, this dynasty was then replaced by another Abhir dynasty of shepherds. This second Abhir dynasty had a succession of three kings and their rule ended when Bhuban Simha was defeated by the Kirati invaders.

The Kiratis were a tribal hill people who came from the East. (The Ramayana mentions them as being dwellers of the north-eastern Himalayan region.) The Kirati invasion of the Kathmandu Valley occurred sometime around 700 BC. The most famous among the Kirati rulers was Yalambar - the first of them.Jitadassi, the seventh king, is said to have helped the Pandavas during the great war of the Hindu epic the Mahabharata. It was also during the reign of Jitadassi that Gautama Buddha was said to have visited the Valley. The Kiratis’ rule saw a succession of 29 kings until the Licchavis in around AD 200 defeated Gasti, the last of them.

The advent of the Licchavis brought in the first golden era of Nepali art and culture. They introduced the Hindu caste system into the Valley. Among the 48 Licchavi rulers, the most well known was Mana Deva I, who ascended the throne in AD 464, was a ruler of considerable talent and abilities. He consolidated the kingdom in all directions with his powerful army and political tact. He was also a patron of the arts. Pagoda-roofed structures came into vogue. Sculptors fashioned exquisite images of their Gods and Kings. It was during this same period that the temples of Changunarayan, Vishankunarayan, Sikhornarayan, and Ichangunarayan were built. Other notable masterpieces include the Reclining Vishnu of Budhanilkantha, the gilding of the roof of Pashupatinath Temple, the struts of Hanuman Dhoka and the Basantapur Tower, the Uku Bahal in Patan, and, the Indreshwar Mahadev Temple at Panauti.

Amsuvarma, of the Thakuri lineage, ascended the throne in AD 605 upon the death of his father-in-law Shivadeva, a Licchavi king. According to the traveling Chinese monk Huen Tsang, Amsuvarma had attained high military and literary glory. Of his palace at Deopatan, Huen Tsang says that it was seven stories high and ornamented with gems and pearls. Amsuvarma made matrimonial alliances with both his powerful neighbors of the north and the south. To Srongsten Gampo, Tibet’s powerful ruler, he offered his daughter, Bhrikuti, and to the Indian Prince, he offered the hand of his sister.

(It was Bhrikuti, along with a Chinese princess, who converted the Tibetan king to Buddhism, thus heralding the advent of the religion the country was later to become famous for. Bhrikuti is considered the Green Tara of the Tibetan Buddhist pantheon while the Chinese princess is known as the White Tara.)
After the death of Amsuvarma in AD 629, power reverted to the Licchavis once again for a considerable period of time. It was only in AD 879 that the real Thakuri Dynasty was founded by Raghadeva. To commemorate this event, Raghadeva established the Nepal Sambat Era, a calendar which is still followed by the Newars of Kathmandu Valley and is running in its 12th century.

The reign of the Thakuris is considered the Dark Age in the history of Kathmandu due to strife and turmoil during this period that included the ravages of multiple foreign invasions. But trade and commerce still flourished and cities and settlements grew.
Another king, Gunakamadeva, who ruled from AD 949 till AD 994 deserves special mention. It was he who introduced the important festivals of Indra Jatra, Macchendranath Jatra, and Krishna Jayanti. But more importantly, Gunakamadeva founded Kantipur, today’s Kathmandu.