Panauti is a small town of Kavre district located in the southeast of Kathmandu. In the ancient period, it used to be the trading hub along with salt trade route between Tibet and India. After the end of salt trade in the 1950s and with the construction of Arniko Highway in 1960s which bypassed the town, Panauti went into an economic rut.

There has been quite a debate on when Panauti was founded. Some believe that Ananda Malla (1274-1310 BC) founded Panauti, while others believe that there is a golden scripture dated 1385 located within the Indreshwar temple stating that King Harisingh Dev founded the place.

Panauti was integrated into the unified kingdom of Nepal at the end of 13th century along with Kathmandu, Patan, and Bhaktapur, which are all former capital cities of Kathmandu valley.