The beautiful valley of Kangra is a region rich in ancient history. The Kings of Kangra belonged to one of the oldest traceable genealogical lines in India. It was in this vicinity Alexander the Great came to a final halt along the banks of the river Beas. During the 7th century archeological evidence shows that this area was a centre of Buddhism and Hindu tantricism.

The muslim army plundered the Kangra Fort and Temple in 1009 CE. Dharamsala was founded by the British in 1846 when they occupied the Kangra Fort and annexed the kingdom of Kangra. They attracted many people to work for them. Sikhs, Punjabis, Jammu and Ghurkas from Nepal, lived side by side with the indigenous Kangri people of the valley and the nomadic Gaddi tribes. Legends has it that the Gaddis migrated from Rajasthan, having lost their land there and came to inhabit this region and to lead their herds of sheep and goats over the high passes to seek mountain pastures in summer and the monsoon, but would spend the winters in the Kangra valley, where many own houses and land.

In 1846 Kangra Fort was occupied by the British, and slowly after that they established what is now Dharamsala, with its commanding views of the valley. The British attracted all kinds of people, missionaries, wives of officers and sick people, treating Dharamsala as a place of rest.

In 1905 there was a huge earthquake. Large areas of the Kangra valley were ruined, and most had to be rebuilt. With Indian independence approaching in 1947 and new borders, Dharamsala, the tranquil and slightly remote hill station found itself relatively close to the Pakistan border. One of the effects was a substantial migration of people to Pakistan. Some people say that as many as 70 % left, so did the British. Upper Dharamsala was fairly emptied on its inhabitants.

In 1960, the newly exiled Dalai Lama was invited to settle in Dharamsala. He was well received, and with him and the Tibetans who gathered around him, Dharamsala gained new life.