It is also believed that Ramayan, a great Hindus was composed at the bank of Saptagandaki River. Ved Vyasa, the composer of Mahabharat also lived here. Ved Vyasa have Vyasa municipality damauli proves this belief.

In ancient times, Kathmandu valley consisted of a big lake. It was called Nagakaha (lake of serpents) as it was the habitat of Nagas i.e. serpents: it's believed that a sage called Bipaswi. Bukkha who lived on the Nagarjun hill in the northwest corner of Nagdaha sowed a lotus seed, in the lake on the full moon day, from which a lotus flower grew after 6 month of the same day. Amazingly an image of swambhu appeared in the flower. Biswapi began to worship the image when it threw bright rays of light.

According to swambhu puran, Manjushree came down from China and worship lord swambhu. He drained out thee water of Nagadha. A beautiful valley with black and fertile soil appeared where Manjushree asked his disciples to settle in there. Dharmakar was made the king of the valley. The population of the valley now known as Kathmandu valley, increased as time passed by. People from different places came and settled here. Later on Dharmadutta came from south India. It's believed that Dharmadatta brought with him the four castes of people and settled in Kathmandu. Thus, the caste system in Nepal was introduced. The four castes were Brahmin, Kshetriya, Baishya, Sudra. Its also believed Dharmakar was the one who built pashupatinath temple.

Danam, a demon over powered kathmandu valley and drove out the valley filled with water and turned into a lake. Its said lard Krishna heard this and came from Mathura and killed the demon. Lord Krishna married the daughter of Danmr. He drained out the water from the lake through a gorge at Chobhar. Lord Krishna belonged to the clan who reared cows. Indian cowherds came and settled in Kathmandu where population dot increased. A new dynasty, Gopal in Sanskrit 'GO'=cow 'Pal'=keeper cowherds began to make over kathmandu. Bhuktaman was the first king of Gopal Dynasty or Ahir Gopal dynasty ruled for 621 years. It was replaced by another dynasty called Mahispal or Abhir. The word Mahispal means those who rear buffaloes. Three kings of this dynasty were able to rule in Nepal, Basasimha, Jayamati Simha, Bhuvan simha.

Kirants invaded Kathmandu and started their rule in Nepal. In the past Kathmandu was called Nepal each of them as synonym. Kathmandu valley was known as Nepal Khaldo (valley) still some people in the villages; remote areas of the country use the word Nepal for Kathmandu. Apart form kathmandu there were some other powerful kingdom in Nepal like Simrangarh, Palpa, Jumla, Doti etc. However the authentic records of history of ancient period os available the history on supposition as been drawn on the basis of religion book. Legends. Chronologies, the ancient period has been called the pre-historic period.