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Peshawar was established as the city of Puruṣapura on the Gandhara Plains in the broad Valley of Peshawar, after 100 CE. It may have been named after a Hindu raja who ruled the city and was known as Purush. The city likely first existed as a small village in the fifth century BCE, near the ancient Gandharan capital city of Pushkalavati, close to present-day Charsadda. In the winter of 327–26 BCE, Alexander the Great subdued the Valley of Peshawar during his invasion of the Indus Valley, as well as the nearby Swat and Buner valleys. Following Alexander's conquest, the Valley of Peshawar came under the suzerainty of Seleucus I Nicator, founder of the Seleucid Empire. A locally made vase fragment that was found in Peshawar depicts a scene from Sophocles' play Antigone, highlighting the cultural reach of the Hellenistic world.

Following the Seleucid–Mauryan war, the region was ceded to the Mauryan Empire in 303 BCE. Around 300 BCE, the Greek diplomat and historian Megasthenes noted that Purushapura was the western terminus of a Mauryan road that connected the city to the empire's capital at Pataliputra, near the modern-day city of Patna in the Indian state of Bihar. As Mauryan power declined, the Greco-Bactrian Kingdom, based in modern Afghanistan, declared its independence from the Seleucid Empire and quickly seized the region around 190 BCE. The city was then captured by Gondophares, founder of the Indo-Parthian Kingdom, who established the nearby Takht-i-Bahi monastery in 46 CE.

In the first century CE, Purushapura came under the control of Kujula Kadphises, founder of the Kushan Empire, and was made the empire's winter capital. The Kushan's summer capital at Kapisi (modern Bagram, Afghanistan) was seen as the secondary capital, while Purushapura was considered to be the empire's primary capital. Ancient Peshawar's population was estimated to be 120,000, which would make it the seventh-most populous city in the world at the time. As a devout Buddhist, the emperor built the grand Kanishka Mahavihara monastery. After his death, the magnificent Kanishka stupa was built in Peshawar to house Buddhist relics. The golden age of the Kushan empire in Peshawar ended in 232 CE with the death of the last great Kushan king, Vasudeva I.

Around 260 CE, the armies of the Sasanid Emperor Shapur I launched an attack against Peshawar and severely damaged Buddhist monuments and monasteries throughout the Valley of Peshawar. Shapur's campaign also resulted in damage to the city's monumental stupa and monastery. The Kushans were made subordinate to the Sasanids and their power rapidly dwindled, as the Sasanids blocked lucrative trade routes westward out of the city. Kushan Emperor Kanishka III was able to temporarily reestablish control over the entire Valley of Peshawar after Shapur's invasion, but the city was then captured by the Central Asian Kidarite kingdom in the early 400s CE.

The White Huns devastated ancient Peshawar in the 460s CE and ravaged the entire region of Gandhara, destroying its numerous monasteries. The Kanishka stupa was rebuilt during the White Hun era with the construction of a tall wooden superstructure, built atop a stone base, and crowned with a 13-layer copper-gilded chatra. In the 400s CE, the Chinese Buddhist pilgrim Faxian visited the structure and described it as "the highest of all the towers" in the "terrestrial world", which ancient travelers claimed was up to 560 feet tall, though modern estimates suggest a height of 400 feet. In 520 CE, the Chinese monk Song Yun visited Gandhara and ancient Peshawar during the White Hun era and noted that it was in conflict with nearby Kapisa. The Chinese monk and traveler Xuanzang visited ancient Peshawar around 630 CE, after Kapisa's victory, and expressed lament that the city and its great Buddhist monuments had decayed to ruin—although some monks studying Theravada Buddhism continued to study at the monastery's ruins. Xuanzang estimated that only about 1,000 families continued in a small quarter among the ruins of the former grand capital.

Until the mid-seventh century, the residents of ancient Peshawar were ruled by Kabul Shahis, who were then displaced by the Hindu Shahis of Kabul. Islam is believed to have been first introduced to the Buddhist, Hindu and other indigenous inhabitants of Purushapura in the later seventh century. In 986–87 CE, Peshawar's first encounter with Muslim armies occurred when Sabuktigin invaded the area and fought the Hindu Shahis under their king, Anandpal. On 28 November 1001, Sabuktigin's son Mahmud Ghazni decisively defeated the army of Raja Jayapala, son of Anandpal, at the Battle of Peshawar and established the rule of the Ghaznavid Empire in the region. During the Ghaznavid era, Peshawar served as an important stop between the Afghan plateau and the Ghaznavid garrison city of Lahore. During the tenth–12th century, Peshawar served as a headquarters for Hindu Nath Panthi Yogis, who in turn are believed to have extensively interacted with Muslim Sufi mystics. As the first Pashtun tribe to settle in the region, the Dilazak Pashtuns began settling in the Valley of Peshawar and are believed to have settled regions up to the Indus River by the 11th century. The Arab historian and geographer al-Masudi noted that by the mid-tenth century, the city had become known as Parashāwar.

In 1179–80, Muhammad Ghori captured Peshawar, though the city was then destroyed in the early 1200s at the hands of the Mongols. Peshawar was an important regional centre under the Lodi dynasty of the Delhi Sultanate. Several other Pashtun tribes began settling rural regions around Peshawar in the late 15th and 16th centuries. The Ghoryakhel and Khashi Khel tribes pushed the Dilazak Pashtun tribes east of the Indus River following a battle in 1515 near the city of Mardan. Hindko continued to be the language of trade and business in the city.

In July 1526, Emperor Babur captured Peshawar. During Babur's rule, the city was known as Begram, and he rebuilt the city's fort, using it as a base for expeditions to other nearby towns. Peshawar remained an important centre on trade routes between India and Central Asia during the Mughal period, and the region was a cosmopolitan area in which goods, peoples, and ideas would pass along trade routes. Its importance as a trade centre is highlighted by the destruction of over one thousand camel-loads of merchandise following an accidental fire at Bala Hissar fort in 1586. Under the reign of Babur's son, Humayun, direct Mughal rule over the city was briefly challenged with the rise of the Pashtun king, Sher Shah Suri, who began construction of the famous Grand Trunk Road in the 16th century. Mughal rule in the area was tenuous, as Mughal suzerainty was only firmly exercised in the Peshawar valley, while the neighbouring valley of Swat was under Mughal rule only during the reign of Akbar. During Akbar's rule, the name of the city changed from Begram to Peshawar. In 1586, Pashtuns rose against Mughal rule during the Roshani Revolt under the leadership of Bayazid Pir Roshan, founder of the egalitarian Roshani movement, who assembled Pashtun armies in an attempted rebellion against the Mughals; the Roshani followers laid siege to the city until 1587. Peshawar was bestowed with its own set of Shalimar Gardens during the reign of Shah Jahan, which no longer exist. Emperor Aurangzeb's governor of Kabul, Mohabbat Khan, used Peshawar as his winter capital during the 17th century and bestowed the city with its famous Mohabbat Khan Mosque in 1630. The Yusufzai tribes rose against Mughal rule during the Yusufzai Revolt of 1667 and engaged in pitched-battles with Mughal battalions near Attock. The Afridi tribes resisted Mughal rule during the Afridi Revolt of the 1670s; they massacred a Mughal battalion in the nearby Khyber Pass in 1672 and shut the pass to lucrative trade routes. Mughal armies led by Emperor Aurangzeb himself regained control of the entire area in 1674. Following the death of Aurangzeb in 1707, his son Bahadur Shah I, former governor of Peshawar and Kabul, was selected to be the new Mughal Emperor, but as Mughal power declined, the empire's defenses were severely weakened. On 18 November 1738, Peshawar was captured from the Mughal governor Nawab Nasir Khan by the Afsharid armies during the Persian invasion of the Mughal Empire under Nader Shah.

In 1747, Peshawar was taken by Ahmad Shah Durrani, founder of the Afghan Durrani Empire. The city was captured in spring of 1758 by the Maratha Confederacy in alliance with the Sikhs. Before that, the fort of Peshawar was being guarded by Durrani troops under Timur Shah Durrani and Jahan Khan. When Raghunathrao, Malhar Rao Holkar and the Sikh alliance of Charat Singh and Jassa Singh Ahluwalia left Peshawar, Tukoji Rao Holkar was appointed as the representative in this area of the sub-continent. In the following year, Ahmad Shah again occupied the city. Under the reign of his son Timur Shah, the Mughal practice of using Kabul as a summer capital and Peshawar as a winter capital was reintroduced, with the practice maintained until the Sikh invasion. Peshawar's Bala Hissar Fort served as the residence of Afghan kings during their winter stay, and it was noted to be the main centre of trade between Bukhara and India by British explorer William Moorcroft during the late 1700s. Peshawar was at the centre of a productive agricultural region that provided much of north India's dried fruit. Timur Shah's grandson, Mahmud Shah Durrani, became king and quickly seized Peshawar from his half-brother, Shah Shuja Durrani. Shah Shujah was then himself proclaimed king in 1803 and recaptured Peshawar while Mahmud Shah was imprisoned at Bala Hissar fort until his eventual escape. In 1809, the British sent an emissary to the court of Shah Shujah in Peshawar, marking the first diplomatic meeting between the British and Afghans. His half-brother Mahmud Shah then allied himself with the Barakzai Pashtuns and captured Peshawar once again, reigning until the Battle of Nowshera in March 1823.

Ranjit Singh invaded Peshawar in 1818, but handed its rule to Peshawar Sardars as vassals. Following the Sikh victory against Azim Khan at Nowshera in March 1823, Ranjit Singh captured Peshawar again and reinstated Yar Mohammed as the governor. By 1830, Peshawar's economy was noted by Scottish explorer Alexander Burnes to have sharply declined, with Ranjit Singh's forces having destroyed the city's palace and agricultural fields. Much of Peshawar's caravan trade from Kabul ceased on account of skirmishes between Afghan and Sikh forces, as well as a punitive tax levied on merchants by Ranjit Singh's forces. Singh's government also required Peshawar to forfeit much of its leftover agricultural output to the Sikhs as tribute, while agriculture was further decimated by a collapse of the dried fruit market in north India. Singh appointed Neapolitan mercenary Paolo Avitabile as administrator of Peshawar, who is remembered for having unleashed a reign of terror; his time in Peshawar is known as a time of "gallows and gibbets". The city's famous Mahabat Khan Mosque, built in 1630 in the Jeweler's Bazaar, was badly damaged and desecrated by the Sikh occupation. The Sikh Empire formally annexed Peshawar in 1834 following advances from the armies of Hari Singh Nalwa, bringing the city under direct control of the Sikh Empire's Lahore Durbar. An 1835 attempt by Dost Muhammad Khan to re-occupy the city was unsuccessful after being unable to breach the Peshawar fort's defenses. Sikh settlers from Punjab were settled in the city during Sikh rule; the city's only remaining Gurdwaras were built by Hari Singh Nalwa to accommodate the newly settled Sikhs. The Sikhs also rebuilt the Bala Hissar fort during their occupation of the city.