Modern period: Gorkha rule

After decades of rivalry between the medieval kingdoms, modern Nepal was created in the latter half of the 18th century, when Prithvi Narayan Shah, the ruler of the small principality of Gorkha, formed a unified country from a number of independent hill states. Prithvi Narayan Shah dedicated himself at an early age to the conquest of the Kathmandu valley and the creation of a single state, which he achieved in 1768.

The country was frequently called the Gorkha Kingdom. It is a misconception that the Gurkhas took their name from the Gorkha region of Nepal. The region was given its name after the Gurkhas had established their control of these areas. Gurkha, also spelt as Gorkha, are people from Nepal who take their name from the legendary eighth century Hindu warrior-saint Guru Gorakhnath. Gurkhas claim descent from the Hindu Rajputs and Brahmins of Northern India, who entered modern Nepal from the west.

After Shah's death, the Shah dynasty began to expand their kingdom into what is present day North India. Between 1788 and 1791, Nepal invaded Tibet and robbed Tashilhunpo Monastery of Shigatse. Alarmed, the Chinese emperor Qianlong dispatched a sizeable army that forced the Nepalese to retreat and pay heavy reparations.

After 1800, the heirs of Prithvi Narayan Shah proved unable to maintain firm political control over Nepal. A period of internal turmoil followed.

Rivalry between Nepal and the British East India Company - over the princely states bordering Nepal and India - eventually led to the Anglo-Nepalese War (1814–16), in which Nepal suffered a complete rout. The unequal Treaty of Sugauli was signed in 1816, ceding large parts of the Nepali territories of Terrai and Sikkim, (nearly onethird of the country), to the British, in exchange for Nepalese autonomy. As the territories were not restored to Nepal by the British, at the time of granting freedom to the people of British India, these have become a part of the Republic of India, although Sikkim was annexed by India later.