Bhutan's early history is steeped in mythology and remains obscure. It may have been inhabited as early as 2000 BC, but not much was known until the introduction of Tibetan Buddhism in the 9th century, when turmoil in Tibet forced many monks to flee to Bhutan. In the 12th century, the Drukpa Kagyupa school was established and remains the dominant form of Buddhism in Bhutan today. The country's political history is intimately tied to its religious history and the relations among the various monastic schools and monasteries.

Bhutan is the only country which has been independent throughout its history, never conquered, occupied, or governed by an outside power. Although there has been speculation that it was under the Kamarupa Kingdom or the Tibetan Empire in the 7th to 9th centuries, firm evidence is lacking. From the time historical records are clear, Bhutan has continuously and successfully defended its sovereignty.

The consolidation of Bhutan occurred in 1616 when Ngawanag Namgyal, a lama from western Tibet known as the Shabdrung Rinpoche, defeated three Tibetan invasions, subjugated rival religious schools, codified the Tsa Yig, an intricate and comprehensive system of law, and established himself as ruler over a system of ecclesiastical and civil administrators. After his death, infighting and civil war eroded the power of the shabdrung for the next 200 years when in 1885, Ugyen Wangchuck was able to consolidate power and cultivated closer ties with the British in India.

Coordinates: 27°25′01″N 90°26′06″E / 27.417°N 90.435°E / 27.417; 90.435

Bhutan (Dzongkha: འབྲུག་ཡུལ་, tr ʼbrug-yul, "Druk Yul"; Devanagari भूटान, Bhūṭān), officially the Kingdom of Bhutan, is a landlocked state in South Asia, located at the eastern end of the Himalayas and bordered to the south, east and west by the Republic of India and to the north by the People's Republic of China. Bhutan is separated from the nearby country of Nepal to the west by the Indian state of Sikkim, and from Bangladesh to the south by the Indian states of Assam and West Bengal.

Bhutan existed as a patchwork of minor warring fiefdoms until the early 17th century, when the area was unified by Shabdrung Ngawang Namgyal, who fled religious persecution in Tibet and cultivated a separate Bhutanese identity. In the early 20th century, Bhutan came into contact with the British Empire, after which Bhutan continued strong bilateral relations with India upon its independence. In 2006, Business Week rated Bhutan the happiest country in Asia and the eighth-happiest in the world, based on a global survey.