Prithvi Narayan Shah (1769-1775 A.D.), with whom we move into the modern period of Nepal's history, was the ninth generation descendant of Dravya Shah ( 1559-1570 A.D.) , the founder of the ruling house of Gorkha. Prithvi Narayan Shah succeeded his father King Nara Bhupal Shah to the throne of Gorkha in 1743 A.D. Sagacious and far-sighted, King Prithvi Narayan Shah was quite aware of the political situation of the valley kingdoms as well as of the Baisi and Chaubisi principalities. He foresaw the need for unifying the small principalities as an urgent condition for survival in the future and set himself to the task accordingly. His assessment of the situation among the hill principalities was correct, and the principalities were brought under control. King Prithvi Narayan Shah's successful entry began with the union of Nuwakot, which lies between Kathmandu and Gorkha, in 1744 A.D. After Nuwakot, he took possession of strategic points in the hills surrounding the Kathmandu Valley. The Valley's communications with the outside world were thus cut off. The occupation of the Kuti Pass in about 1756 A.D. stopped the valley's trade with Tibet.

Finally, King Prithvi Narayan Shah entered the Valley, after glorious unification of Kirtipur. Consequently Jaya Prakash Malla of Kathmandu managed to escape with his life and took asylum in Patan. When the unification was extended to Patan a few weeks later both Jaya Prakash Malla and the King of Patan, Tej Narsingh Malla, took refuge in Bhaktapur, which was also unified after some time. Thus King Prithvi Narayan Shah unified the Kathmandu Valley and Kathmandu became the capital of the modern Nepal by 1769 A.D. Once the foundation of the Kingdom of Nepal was thus laid, King Prithvi Narayan Shah, turned his attention towards the east. The Sena Kingdom of Choudandi was united by 1773 A.D. and Vijaypur, another Sena Kingdom was annexed shortly after.

King Prithvi Narayan Shah passed away in January, 1775 A.D. at the age of 52. The Kingdom of Nepal, which he founded, extended to the Marsyandi river in the west and to the Mechi and Kankai rivers in the east and comprised more than one third of the present territory of the Kingdom of Nepal. King Prithvi Narayan Shah, The Great, by his tireless efforts was successful in bringing together diverse religio-ethnic groups under one national banner and inculcating in them a sense of national pride and belonging. He was a true nationalist in his outlook and was in favour of adopting a closed-door policy with regard to the British. Not only his social and economic views guided the country's socio-economic course for a long time, his use of the imagery," a yam between two boulders" in Nepal's geo-political context, formed the principal guideline of the country's foreign policy for future centuries. King Prithvi Narayan Shah was indeed " The Founder of the Nation," who had a vision not only for individual tryst with destiny but also for the national goal of peace and prosperity.

King Prithvi Narayan Shah was succeeded by his eldest son Pratap Singh Shah (1775-1777 A.D.) who enjoyed a quite brief rule.

King Pratap Singh Shah was succeeded by his infant son Rana Bahadur Shah ( 1777-1779 A.D.). The guardianship of the infant king was at first given to Bahadur Shah, the king's uncle. But later, Rajendra Laxmi, the widowed queen mother, took over the regency herself and forced Bahadur Shah into exile. Most of the Chaubisi principalities were annexed to the Kingdom of Nepal during her regency.

Nepal's boundary in the west was extended as far as Kumaon (Almorah) in 1792 A.D. when the country became entangled on a war with China in 1788 and 1791 over a trade dispute. This war was concluded with the signing of a peace treaty between Nepal and China. After this war, the extension of territory in the west was resumed and Nepalese forces occupied the areas up to Kangra by the first decade of the 19th century.