Dharan started as a small trading settlements. Over the last couple of decades, the population of Dharan has increased and diversified to include people from various ethnicities like Limbu, Rai, Gurung, Newar, Brahmins, Chhetris etc.
The modern Dharan's foundation was laid in 1902 A.D. by prime minister Chandra Samsher. He established a small village at the foot of Bijayapur hillock and named it Chandranagar (now Purano Bajar). The purpose was to supply timber to East India Company, who in 1890s had expanded its North Eastern territory and was laying railway tracks. The first government official to be appointed in this small village of Chandranagar was Subba Ratna Prasad. A settlement grew steadily over the course of time. This growing settlement was named Juddha Nagar (now Naya Bazaar) after Prime minister Juddha Samsher. It was declared a municipal town in 1960.
The British Gorkha Recruit Center was established in 1953 and this increased the flow of people and expansion of the town. Recruits from all over Nepal flocked to join British Gurkha, thereby drastically altering the face of Dharan. There was a surge in population with recruits bringing their families, and others who came to seek employment and exploit business opportunities. As a result, Dharan has emerged as one of the biggest towns in eastern Nepal. It is in true sense a melting pot of different ethnic groups, languages, dialects and religions.
In 1962, Nepal was divided into 14 administrative zones and 75 districts and Dharan was made the zonal headquarters of Kosi Zone. Initially, the town was divided into eleven wards, but in 1980 Banjjhogara Gaon Panchayat at the east (which is now the most developed area of Dharan) and Ghopa Gaon Panchayat at the west were added to Dharan Town Panchayat. This expansion led to the reformation of the wards. Now Dharan is divided into nineteen wards.
