Little is known about the history of any settlement at Gyantse before the fourteenth century when it emerged as the capital of a small kingdom ruled by a lineage of princes hailing originally from northeast Tibet and claiming descent from the legendary Tibetan folk hero, King Gesar of Ling. They allied themselves to the powerful Sakya order and, owing to its position between Lhasa and Shigatse, with India to the south, Gyantse operated as a staging post in the wool trade between Tibet and India. By the mid-fifteenth century, the Gyantse Dzong, Pelkor Chode Monastery and the Kumbum had been built, although decline followed as other local families increased their influence.

Gyantse rose to prominence again in 1904 when Younghusband's British expedition, equipped with modern firearms, approached the town via the trade route from Sikkim, routed 1500 Tibetans at Tuna, killing over half of them, and then marched on Gyantse. In July 1904, the British took the Dzong with four casualties while three hundred Tibetans were killed. From here the British marched on to Lhasa. As part of the ensuing agreement between Tibet and Britain, a British Trade Agency was established in Gyantse and as relations between Tibet and the British in India thawed, the trade route from Calcutta up through Sikkim and on to Gyantse became an effective one