Bhutan as an independent geographical entity did not exist during the larger part of the first millennium. According to the account of the famous Chinese traveler of 7th century, Hiuen Tsang, Bhutan did not have a separate status outside the political framework of Indian.
It lay under the sway of kingdom of Kamarupa (Assam). Following the death of King Bhaskaravarma of Kamarupa in 650 AD, a period of instability and turmoil prevailed in northeastern India, and Kamarupa lost effective influence over Bhutan.
Thereafter Bhutanese lived more or less in isolation-free from any external domination. At the beginning of the 8th century when Tibet was at the peak of its military strength, Tibetan armies invaded Bhutan. There was little resistance from the Bhutanese side.
Some of the inhabitants fled to the plains of Assam. The rest submitted to, the Tibetan rule. Tibetan armies were followed by groups of Tibetan lamas, farmers and herdsmen. But the direct political domination of Tibet over Bhutan was short-lived and ended with the decline of Tibet in 9th century.
However, Tibetan cultural influence continued as the bulk of the Tibetan people stayed on. A notable development during this phase was the arrival of Padmasambhava, known in Tibet as Guru Rimpoche (the Precious Teacher) at the invitation of a local prince in central Bhutan. Guru Padmasambhava was primarily responsible for the introduction of Buddhism in Bhutan.
Following the withdrawal of the Tibetan armies, central authority collapsed in Bhutan and the country once again plunged into a state of fragmented sub- regions. This situation continued till early 17th century when the country was unified by a remarkable leader who arrived from Tibet and adopted Bhutan as his homeland. In 1616, Shabdung Nawang Namgyal, a lama of the Drukpa sect came to take in refuge in Bhutan.
He was determined to build a homeland for his religious school and unite the country on a permanent basis. Nawang Namgyal repulsed attacks from Tibet, controlled the numerous warring factions within Bhutan and established a strong centralized rule over the entire country.
After establishing his military authority, Ngawang Namgyal proclaimed himself as the religious (Dharam Raj) as well as political head of Bhutan. Bhutan thus became a theocratic state. The Dev Raj, the temporal authority was elected by a council of lamas. The state administration was completely dominated by Lamas, i.e. religious leaders. However, since mid-18th century, the control of Lamas deteriorated and gradually feudal lords started gaining control in the state system.
The Shabdung was totally ineffective in stemming the tide of revolt and counter revolt. There was virtually no central authority as regional governors (Penlops) asserted their autonomous powers. The Tongsa Penlop and the Paro Penlop were major figures in the wrangle.
The last and decisive civil war took place in 1884, when Ugyen Wangchuk, the Tongsa Penlop emerged victorious and became the most powerful figure and the virtual king of the country. In 1907, an assembly of representatives of the monastic community, civil servants and the people, unanimously decided to install Ugyen Wangchuk, the most influential chief among the contenders for the office of Dev Raj as a hereditary ruler of the country. With this, hereditary monarchy replaced the noble institution of Shabdung in the political life of Bhutan.
The idea of stabilising the country by introducing hereditary monarchy received full support from the British Government in India. Throughout the 19th century, the British in India were at a loss to negotiate with Bhutan as the central government in Bhutan was weak. In 1865, they launched a full-scale war against the Bhutanese and annexed the Duars or entrances in the Bhutan hills which were being used by the Bhutanese to launch raids into the plains of India.
By the treaty of 1865 Bhutan had become a protectorate state of British Government in India although it never became an Indian state. After Ugyen Wangchuk became the hereditary monarch, the British revised the Treaty of 1865 in 1910. By this revised treaty, the Bhutanese government agreed to be guided by the advice of the British Government in regard to its external relations, and the British, in return, undertook to abstain from interference in the internal affairs of Bhutan.