Many historians and locals believe that Jammu was founded by Raja Jamboolochan in 14th century BCE. During one of his hunting campaigns he reached the Tawi River where he saw a goat and a lion drinking water at the same place. The king was impressed and decided to set up a town after his name, Jamboo. With the passage of time, the name was corrupted and became "Jammu". According to one "folk etymology", the name "Kashmir" means "desiccated land" (from the Sanskrit: Ka = water and shimeera = desiccate). According to another folk etymology, following Hindu mythology, the sage Kashyapa drained a lake to produce the land now known as Kashmir.

In the Rajatarangini, a history of Kashmir written by Kalhana in mid-12th century, it is stated that the valley of Kashmir was formerly a lake. This was drained by the great rishi or sage, Kashyapa, son of Marichi, son of Brahma, by cutting the gap in the hills at Baramulla (Varaha-mula). When Kashmir had been drained, Kashyapa asked Brahmans to settle there. This is still the local tradition, and in the existing physical condition of the country, we may see some ground for the story which has taken this form. The name of Kashyapa is by history and tradition connected with the draining of the lake, and the chief town or collection of dwellings in the valley was called Kashyapa-pura name which has been identified with the Kao-1r6.nupos of Hecataeus (apud Stephen of Byzantium) and Kaspatyros of Herodotus (3.102, 4.44). Kashmir is the country meant also by Ptolemy's Kao-ir,~pta.

Cashmere is an archaic spelling of Kashmir, and in some countries it is still spelled this way.

Kashmir was one of the major centre of Sanskrit scholars. According to Mahabharata evidence, the Kambojas had ruled over Kashmir during epic times and that it was a Republican system of government under the Kamboj. The capital city of Kashmir (Kamboj) during epic times was Rajapura e.g. Karna-Rajapuram-gatva-Kambojah-nirjitastava. Epic Rajapura has been identified with modern Rajauri . Later, the Panchalas are stated to have established their sway. The name Peer Panjal, which is a part of modern Kashmir, is a witness to this fact. Panjal is simply a distorted form of the Sanskritic tribal term Panchala. The Muslims had prefixed the word " peer " to it in memory of one Siddha Faqir and the name thence-after is said to have changed into Peer Panjal.

The Mauryan emperor Ashoka is often credited with having founded the city of Srinagar. Kashmir was once a Buddhist seat of learning, perhaps with the Sarvāstivādan school dominating. East and Central Asian Buddhist monks are recorded as having visited the kingdom. In the late 4th century AD, the famous Kuchanese monk Kumārajīva, born to an Indian noble family, studied Dīrghāgama and Madhyāgama in Kashmir under Bandhudatta. He later becoming a prolific translator who helped take Buddhism to China. His mother Jīva is thought to have retired to Kashmir. Vimalākṣa, a Sarvāstivādan Buddhist monk, travelled from Kashmir to Kucha and there instructed Kumārajīva in the Vinayapiṭaka.

In the 14th century, Islam gradually became the dominant religion in Kashmir, starting with the conversion in 1323 of Rincana, the first king of a new dynasty from Ladakh. The Muslims and Hindus of Kashmir lived in relative harmony, since the Sufi-Islamic way of life that ordinary Muslims followed in Kashmir complemented the Rishi tradition of Kashmiri Pandits. This led to a syncretic culture where Hindus and Muslims revered the same local saints and prayed at the same shrines. The famous sufi saint Bulbul Shah was able to persuade the king of the time Rinchan Shah from Ladakh to adopt the Islamic way of life, and the foundation of Sufiana composite culture was laid when Muslims, Hindus and Buddhists were co-existing.

The metrical chronicle of the kings of Kashmir, called Rajatarangini, has (erroneousy) been pronounced by Professor H.I. Wilson to be the only Sanskrit composition yet discovered to which the appellation "history" can with any propriety be applied. It first became known to the Muslims when, on Akbar's invasion of Kashmir in 1588, an amalgamated version was presented to the emperor. A translation into Persian was made at his order. A summary of its contents, taken from this Persian translation, is given by Abul Fazl in the Ain-i-Akbari. The Rajatarangini was written by Kalhana in the middle of the 12th century. His work, in eight books, makes use of earlier writings that are now lost.

The Rajatarangini is the first of a series of four histories that record the annals of Kashmir. Commencing with a rendition of traditional 'history' of very early times (3102 BCE), the Rajatarangini comes down to the reign of Sangrama Deva, (c.1006 AD) and Kalhana. The second work, by Jonaraja, continues the history from where Kalhana left off, and, entering the Muslim period, gives an account of the reigns down to that of Zain-ul-ab-ad-din, 1412. P. Srivara carried on the record to the accession of Fah Shah in 1486. The fourth work, called Rajavalipataka, by Prajnia Bhatta, completes the history to the time of the incorporation of Kashmir in the dominions of the Mogul emperor Akbar, 1588.