The History of Peshawar is very relevant to the discussion about Durand Line and Peshawar which seems to occupy a prominent space on the discourse between Pakistanis and Afghans.

Peshawar occupies a region that was dominated by various tribal groups of Indo-Iranian origin and a variety of other groups, possibly of Dravidian origin, maybe prior to invasion of Aryan tribes and their settlement. The region had links to the Harappan civilization of the Indus river valley and to Aryana and Bactria, two ancient names of Afghanistan. The border known as the Durand Line was fixed by the British in 1893 and divided ethnic Pakhtun or Pashtun (in southern accent) territories into two parts. As a result, many Pakhtuns have agitated for a re-unification of Afghanistan or Pakhtunistan. The resulting "Pakhtunistan" issue has often adversely impacted relations between Pakistan and Afghanistan, but the issue has largely become dormant since the Soviet invasion of Afghanistan and the arrival and settlement of nearly 4 million Afghan refugees in Pakistan.[2]

It has been argued that an ancient city named Pushkalwati, founded by Bharat's son Pushkal, may have existed in this general area during ancient Indian times before the Persian invasion of the Indian subcontinent. The city that would become Peshawar, called Purushapura, was actually founded by the Kushans, a central asian tribe of Tocharian origin, over 2,000 years ago. Prior to this period the region was affiliated with Gandhara and was annexed first by the Persian Achaemenid empire and then the Hellenic empire of Alexander the Great. The city passed into the rule of Alexander's successor, Seleucus I Nicator who ceded it to Chandragupta Maurya, the founder of the Maurya empire. Buddhism was introduced into the region at this time and claimed the majority of Peshawar's inhabitants before the coming of Islam.

The area that Peshawar occupies was then seized by the Greco-Bactrian king, Eucratides (c. 170 - c. 159 BCE), and was controlled by a series of Greco-Bactrian kings who ruled the Indo-Greek kingdom of what is today Pakistan and North India. It was later held for some time by several Indo-Parthian kings, another group of Iranian invaders from Central Asia, the most famous of whom, Gondophares, was still ruling c. 46 CE, and was briefly followed by two or three of his descendants before they were displaced by the first of the "Great Kushans", Kujula Kadphises, around the middle of the 1st century.

Peshawar formed the eastern capital of the empire of Gandhara under the Kushan king Kanishka I who reigned from at least 127 CE and, perhaps, for a few years prior to this. Peshawar also became a great centre of Buddhist learning. Kanishka built what was probably the tallest building in the world at the time, a giant stupa, to house the Buddha's relics, just outside the Ganj Gate of the old city of Peshawar.

Kanishka's stupa was said to be an imposing structure as one travelled down from the mountains of Afghanistan onto the Gandharan plains. The earliest account of the famous building is by the Chinese Buddhist pilgrim monk, Faxian, who visited it in 400 and described it as being over 40 chang in height (probably about 120 m. or 394 ft) and adorned "with all precious substances". "Of all the stūpas and temples seen by the travellers, none can compare with this for beauty of form and strength." It was destroyed by lightning and repaired several times. It was still in existence at the time of Xuanzang's visit in 634. From the ruined base of this giant stupa there existed a jewelled casket containing relics of the Buddha, and an inscription identifying Kanishka as the donor, and was excavated from a chamber under the very centre of the stupa's base, by a team under Dr. D.B. Spooner in 1909. The stupa was roughly cruciform in shape with a diameter of 286 ft (87 m.) and heavily decorated around the sides with stucco scenes.

Sometime in the 1st millennium BCE, the group that now dominates Peshawar began to arrive from the Suleiman Mountains to the south and southwest, the Pashtuns. It is debatable as to whether or not the Pashtuns existed in the region even earlier as evidence is difficult to attain. Some writers such as Sir Olaf Caroe write that a group that may have been the Pakhtuns existed in the area and were called the Pactycians by Herodotus and the Greeks, which would place the Pakhtuns in the area of Peshawar much earlier along with other Indo-Iranian tribes. Ancient Hindu scriptures such as the Rig-Veda, speak of an Aryan tribe called the Pakht, living in the region. Regardless, over the centuries the Pakhtuns would come to dominate the region and Peshawar has emerged as an important center of Pakhtun culture along with Kandahar and Kabul as well as Quetta in more recent times. Muslim Arab and Turkic arrived and annexed the region before the beginning of the 2nd millennium. The Pakhtuns began to convert to Islam following early annexation by Arab empire from Khurasan (in what is today western Afghanistan and northeastern Iran).

Peshawar was taken by Turkic Muslims in 988 and was incorporated into the larger Pakhtun domains by the 16th century. The founder of the Mughul dynasty that would conquer South Asia, Babur who hailed from what is today Uzbekistan, came to Peshawar and found a city called Begram and rebuilt the fort there, in 1530. His grandson, Akbar, formally named the city Peshawar which means "The Place at the Frontier" in Persian and expanded the bazaars and fortifications. The Muslim technocrats, bureaucrats, soldiers, traders, scientists, architects, teachers, theologians and Sufis flocked from the rest of the Muslim world to Islamic Sultanate in South Asia and many settled in the Pashawar region. Earlier it had been known as the "City of Flowers" and the "City of Grain". In the days of the Kushan King it was called the "Lotus Land".

The Pakhtun conqueror Sher Shah Suri, turned Peshawar's renaissance into a boom when he ran his Delhi-to-Kabul Shahi Road through the Khyber Pass and Peshawar. Thus the Mughals turned Peshawar into a "City of Flowers" by planting trees and laying out gardens similar to those found to the west in Persia. The Mughals and Safavids of Iran would often contest the region as well. Khushal Khan Khattak, the Pakhtun/Afghan warrior poet, was born near Peshawar and his life was intimately tied to the city. He was also an implacable foe of the Mughal rulers, especially Aurangzeb. Khattak apparently was an early Pakhtun nationalist, who agitated for an independent Afghanistan including Peshawar. After the decline of the Mughal Empire, the city came under Persian control during the reign of Nadir Shah by the 18th century.

Peshawar would also join, following a loya jirga) as a Pakhtun region, the Afghan/Pakhtun empire of Ahmad Shah Durrani by 1747. Pakhtuns from Peshawar took part in incursions of South Asia during the rule of Ahmad Shah Durrani and his successors. The Sikhs invaded and conquered Peshawar in 1834 after wresting it from Afghanistan. Sikh soldiers burned a large part of the city and felled the trees shading its many gardens for firewood. The following 30 years of Sikh rule saw the destruction of Peshawar's own Shalimar Gardens and not to mention the dwindling of the city's population by almost half.

The city was liberated and reverted to Afghan control following the death of Ranjit Singh. The British influenced and then ultimately ruled the region from 1849 to 1947, when it became part of the new nation of Pakistan.

Being amongst the most ancient cities of the region between Central, South, and West Asia, Peshawar has for centuries been a centre of trade between Afghanistan, the South Asia, and Central Asia as well as the Middle East. Its famed markets such as the Qissa Khawani Bazaar (market of story tellers) are emblematic of this mixture of cultures.

Peshawar would emerge as a centre of Pakhtun intellectuals and culture. Some Pakhtuns still adhere to Pakhtunistan movement that sought either to merge western Pakistan with Afghanistan or to form a greater Pakhtun state to be known as Pukhtoonkwa and this movement gained some support before the Soviet invasion of Afghanistan. Nearly 2 million ethnic Afghan Pakhtuns refugees have permanently settled in Pakistan.

After the Soviet invasion of Afghanistan in 1979 Peshawar served as a political center for anti-Soviet Mujahideen, and was surrounded by huge camps of Afghan refugees. Many of the refugees remained there through the civil war which broke out after the Soviets were defeated in 1989, the rule of the Taliban, and the invasion by American and allied forces in late 2001. Peshawar would replace Kabul and Qandahar as the center of Pakhtun cultural development during this tumultuous period. Additionally, Peshawar managed to assimilate many of the Pakhtun Afghan refugees with relative ease, while many other Afghan refugees remained in camps awaiting a possible return to Afghanistan.

Until the mid-fifties Peshawar was enclosed within a city wall and sixteen gates. Of the old city gates the most famous was the Kabuli Gate but only the name remains now. Peshawar has not grown as much in size or capacity as the population has. As a result it has become a polluted and overcrowded city. Peshawar needs to expand considerably in order to prevent overcrowding. However, despite turmoil in Pakistan and intense turmoil in Afghanistan, Peshawar has remained a relatively quiet and peaceful city, as compared to violence in Karachi or Balochistan, and civil war in Afghanistan.

Peshawar continues to be a city that links Pakistan to Afghanistan and has emerged as an important regional city in Pakistan and remains a focal point for Pakhtun culture. The Bakhshali Manuscript used in the Bakhshali approximation was found here. Also, Peshawar Nights uses this Peshawar as the setting.