The name Bhutan appears to derive from the ancient Indian term Bhotanta which means the end of the land of the Bhots (Tibet). The Bhutanese themselves refer to their country as Druk Yul or the Land of the Thunder Dragon. Druk meaning dragon and extending from the predominant Drukpa school of Tibetan Buddhism. Bhutan's history parallels Buddhism's spread in the Himalayas and to properly understand Bhutan's history one needs to understand its religion.

Mystery surrounds Bhutan's distant past, as books and papers were lost in consecutive fires at the national printing works and at Punakha Dzong in 1828 and 1832. A massive earthquake in 1896 and a fire in Paro Dzong destroyed all but a few of the remaining records.

Bhutan was not unified under a central authority until the 17th century, although the Buddhist religion in the country had provided some sort of cohesion during the Middle Ages. It was in 747 AD that Padma Sambhava, who is known as Guru Rimpoche, made his legendary trip from Tibet across the mountains flying on a tigress's back. He arrived in the Paro valley at Taktsang Lhakang, better known as Tiger's Nest. This monastery was burned to the ground by a fire in 1998. Guru Rimpoche is not only recognised as the founder of the Nyingmapa religious school but is also considered to be the second Buddha.

Many of Bhutan's most celebrated ancestors descend from the Nyingmapa School, including the ancestors of the present-day Royal Family. Pema Lingpa, the best known Nyingmapa saint, died in Bumthang, his home, in 1521. He was the reincarnation of Guru Rimpoche and Longchen Rabjampa the philosopher. In his lifetime he founded the monasteries at Petsheling, Kungzandra and Tamshing in the Bumthang valley.

Shabdrung Ngawang Namgyal, a Tibetan lama of the Drukpa School, designed the present system of intertwined religious and secular government. He came to Bhutan in 1616. At that time no central authority existed and regional conflict had persisted for centuries. In his quest to unify the country, he gained the support of many powerful families of his school and constructed dzongs (fortress-monasteries) in the main valleys of western Bhutan.

Shabdrung Ngawang fought and won a battle against the Tibetans in 1639 and assumed the title Shabdrung, meaning 'at whose feet one submits'. In effect he became the first secular and religious leader in Bhutan.

During the next two centuries, civil wars intermittently broke out and the regional penlops became increasingly powerful. At the end of the 19th century, the Penlop of Trongsa (who controlled central and eastern Bhutan) overcame his greatest rival, the Penlop of Paro (who controlled western Bhutan), and was soon afterwards recognised as the overall leader of Bhutan. The Penlop of Trongsa, Ugyen Wangchuk, was elected the first King of Bhutan in 1907 by an assembly of representatives of the monastic community, civil servants and the people.

This monarchy has thrived ever since and the present King, His Majesty Jigme Singye Wangchuck, the first King's great grandson, commands the overwhelming support of his people. After assuming the throne in 1974, the present King continued his father's policy of pragmatic development. He actively pursues industrial progress, country-wide education and medical care and ensures, at the same time, that Bhutan's culture remains intact.

In 1998, His Majesty Jigme Singye Wangchuck empowered the National Assembly to make all legislative decisions independent of Royal decree.