The period following the decline of the Licchavi Dynasty witnessed little growth in the geographical or administrative power of the Nepalese state. In fact, it is the least understood time in Nepal's history, with only a very few inscriptional sources supplemented by some dated religious manuscripts. It appears that the Kathmandu Valley and surrounding valleys officially remained part of a single political unit, although there were struggles for the throne among different royal lineages and notable families. Donations to religious foundations were dated by a new Newari era beginning in 879, a development suggesting the founding of a new dynasty. Surviving records show a movement away from Sanskrit and admixtures of early Newari, the language of the Newar people in the valley.

The main influences on Nepal continued to come from Mithila or Tirhut to the south. This area came intermittently under the domination of warriors allied to the Chalukya Dynasty from Karnataka in southern India. One of their lieutenants proclaimed himself king in 1097 and founded a capital at Simraongarh in the Tarai. From there he launched raids that allowed the Chalukyas to later claim domination over Nepal without exerting a perceptible impact on Nepalese history. By the late twelfth century, however, the king in Nepal was called Somesvaradeva (or Someswaradeva, reigned ca. 1178-85), a name of Chalukya kings, indicating some degree of political contact with Indian rulers. By the end of Somesvaradeva's reign, there was evidence of mounting political chaos and fighting for the throne.

Profound changes were occurring in the religious system of Nepal. The early patronage of Buddhism by the kings gave way to a more strictly Hindu devotion, based on the worship of a variety of deities but ultimately relying on Pashupatinath, the site of one of Hinduism's most sacred Shiva shrines. Within the Buddhist community, the role of the monks and monasteries changed slowly but radically. Early Buddhism had rested on the celibacy and meditation of monks and nuns who had withdrawn from the world in their own living complexes (vihara). As a more ritualistic vajrayana Buddhism expanded, a division grew up between the "teachers of the thunderbolt" (vajracharya) and ordinary monks (bhikshu), leading to caste-like divisions and the marriage of religious teachers. The higher-ranking teachers monopolized the worship in the monasteries and controlled the revenues brought in from monastic estates. Monasteries became social and economic centers, serving as workshops and apartments as well as shrines. These roles were kept intact well into the twentieth century.

Data as of September 1991