Buddhist community in modern Nepal resembles the state of Buddhism in North India after the Gupta era (700-1200), when Theravadin, Mahayana, and Vajrayana lineages were all present. The rulers of Nepal have primarily been Hindu, but have supported the development of Buddhism over the centuries.

The recorded history of Nepal does not start until around 800 BC, with the beginning of the Kirat Period (800 BC - 300 AD). The Kirats ruled for about 1000 years and were ruled by a total of 28 kings during that time. The remarkable event during this period is the coming of Gautam Buddha in the time of the 7^th king. The Buddha supposedly spent time in Patan, where he elevated the blacksmith caste to goldsmiths and bestowed upon them the name of his own clan, Sakya.

The great emperor of India, Ashoka, was also a visitor to Kathmandu in this period. As a follower of Buddhism, Ashoka visited Lumbini, the birthplace of Buddha, and erected stupas in Kathmandu. His daughter married a local prince and further spread the religion.

Kings from the Malla Period(1200 - 1769 AD), although were Hindu and following strict Brahmin rituals, they were tolerant of Buddhism, which was widespread at the court and among the people - especially in its Tantric form, the cult of Vajrayana.

The Newar tradition emphasizes ritual and festival performances within caste groups, and these are carried out without any overt articulation of religious tenets. Buddhist communities cohere far less around philosophy than around the shared ideology and rituals associated with merit-making.

From 1846 until 1951 the despotic Rana family sought to undermine both Buddhism and Newar culture through legal sanctions, land seizures, and persecutions. The Shahs and Ranas did keep the state independent from the British Empire and (after 1947) from India, virtually closing off Nepal from outsiders until 1951, when the Shah dynasty regained power. The Newars have survived, though their culture was suppressed by the Gorkhali tate and their valley inundated by ethnic migrations to the dynasty's capital.

Unique to the modern Buddhist world is the Newar monastic community (samgha), defined by an endogamous caste that forms a Mahayana counterpart to the Hindu Brahmans. Like a Brahman caste, the Newar samgha has for centuries married, making the entire Buddhist community one of householders. A two-section, endogamous caste with the surnames Vajracarya and Sakya, its members maintain the monastic ritual traditions and often still inhabit the residential compounds referred to by the classical term vihara, "monastery". Most Newar Buddhists, including all lower castes, participate exclusively in the exoteric level of Mahayana devotionalism. They direct their devotions to the Buddhist shrines (caitya).

Newar Buddhism also has a Vajrayana (or "tantric") elite; only high-caste Vajracaryas, Sakyas, Uray (merchants), and select artisans are eligible for the initiations (diksas) that direct meditation and ritual to the esoteric deities.

Newar Buddhists content themselves with a faith in karman-rebirth doctrine. This core doctrine considers all individuals to possess karmically determined capacities for spiritual understanding and practice. The indicators of a person's karmic state are castes, wealth, length of life, proclivity to sickness, and circumstances at death. This atman (soul) centers and energizes individual consciousness, forms the repository for karman, and after death leaves the body through one of the bodily orifices and becomes the vehicle that endures to the subsequent rebirth.

The Lichhavi Period (from 300AD) is the first documented period in the history of Nepal. Indian Buddhism began to penetrate into Nepal in perhaps the 4th or 5th century AD. In 602 AD, the first Thakuri dynasty began with the ascent of Amsuverma. Amsuverma married his sister to an Indian prince and his daughter, Bhrikuti, to Tibet�s powerful King Tsrong-tsong Gompo. Bhrikuti is believed to have taken as part of her dowry the begging bowl of Buddha and other artifacts of Buddhism. Together with Gompo�s second wife, a Chinese princess, they converted the king and Tibet to Buddhism. After that, Nepal became a great meeting point for Indian and Tibetan Buddhist teachers. Many great practitioners visited, lived, and taught in Nepal.

The Tibetan Mahayana tradition is the most popular in northern Nepal, with approximately 3000 monasteries. The Tibetan Buddhism is centered upon celibate monastic schools. After the Dalai Lama's escape in 1959, the refugees from Tibet have increased the number of Tibetan immigrants and monastic establishments in the north region. Although not aggressive in missionizing the local society, the resident lamas have offered alternative festival, ritual, and meditation practices to the Newar laity.

The Theravada school's origins in Nepal are connected to Sri Lanka in the last century, where a Buddhist revival occurred in the context of the Sinhalese anti-Christian and anti-colonialist struggle. After the early encounters with confrontational Christian missionaries, Buddhist reform leaders emphasized a return to the early (Pali) texts, education through printed materials, a simplified canon of belief, regular preaching by monks, communal services, and a key role for laymen. As a result a new form of "export Theravada Buddhism" emerged, stripped of superstition and presented as compatible with science. The movement reached Nepal by the 1920s through urban Newars disaffected with their own Buddhist tradition.

In the 1930s the first Nepalese ordained as Theravada monks in India, but Nepal's Hindu ruler's refused to allow them to return to the country. Since the early 40s some Nepalese have turned to Theravada practice based on the Pali canon, stressing the rational aspects of Buddhism over ritual. With the change of government in 1950 and the coming of religious freedom, Theravada Buddhism has successfully established proper Theravada monasteries at Svayambhu in 1952 and, by 1980, across the Kathmandu Valley.