The different divisions of Newars had different historical developments before their arrival in the Kathmandu valley. The common identity of Newar was formed after their arrival to the valley. Until the unification of Nepal, with the possible exception of the Muslims under Gayasuddin who attacked and destroyed many parts of the valley, all people who had inhabited the valley at any point of time were either Newar or were progenitors of Newar. So, the history of Newar correlates to a great magnitude to the history of Kathmandu valley prior to the Unification of Nepal.
The earliest known history of Newar and Kathmandu valley were recorded in the form of mythical scriptures. One of such texts which even accounts the creation of the valley is Swayambhu Purana. According to the Swayambhu Purana, the Kathmandu valley was a giant lake called Nāgdaha until the Bodhisattva Manjusri, with the aid of a holy sword called Chandrahrāsa, cut open a part of southern hill of Kachchhapāla and then cut open Gokarnadaha and drained the giant lake, allowing humans to settle the valley land. This apocryphal legend is supported by some geological evidence of an ancient lakebed and it provides an explanation for the high fertility of Kathmandu valley soil.
According to the Swayambhu Purana, Manjusri then established a city called Manjupattan (Sanskrit "Land Established by Manjusri"), now called Manjipā, where he crowned Dharmākara as the king of the land. A shrine dedicated to Manjusri is still present in Majipā.
No recorded historical document has been found after this era till the advent of Gopal era. A genealogy of emperors is recorded in a book called Gopal Raj Banshawali. According to this manuscript, Gopals were followed by Mahispals, and Kirats before Licchavis entered from south. Some claim Buddha to have visited Nepal during the reign of Kirat emperor Jitedasti.
The Licchavi dynasty ruled for at least 600 years, followed by the Malla dynasty in 12th century AD. The Nepal Bhasa script is estimated to be at least 1200 years old. Nepal Bhasa inscriptions in an ancient manuscript, Nidan, from 901 AD and on a stone tablet from 1173 AD in the courtyard of Bajrayogini Temple at Sankhu, attest to the deep roots of Newar culture in the Kathmandu valley.
Newar reign over the valley and their sovereignty and influence over neighboring territories ended approximately 250 years ago with the conquest of the Kathmandu valley in 1769 by the Gorkhali Shah dynasty founded by Prithvi Narayan Shah. Newars were engaged in business between Tibet and Moguls in India. So, to affect the Mogul empire's treasury, British East India Company supplied weapons and advice to Prithvi Narayan Shah, who in return would conquer Kathmandu Valley and put an end to the trade between Tibet and Moguls of India. Systematic brutal suppression of the Newar people was pursued for generations during early dynastic rule in order to discourage the Newar people from any political aspiration.
The Newar maintain a highly literate culture and their members are prominent in every sphere, from agriculture, business, education and government administration to medicine, law, religion, architecture, fine art, and literature. There is a wide acceptance of the fact that Newar architects may have been responsible for developing Asia's hallmark multi-tiered pagoda architecture. Newar devotional pauba and thangka painting, sculpture and metal craftsmanship are world-renowned for their exquisite beauty. The fine temples and palaces of Kathmandu, Patan (Yala)Bhaktapur are largely the product of Newar architects, artisans and sculptors. Now the enterprising Newars are spread across Nepal, Bhutan, State of Sikkim and the District of Darjeeling in India.