Human habitation was probably present in and around Delhi during the second millennium BC and before, as evidenced by archeological relics. The city is believed to be the site of Indraprastha, legendary capital of the Pandavas in the Indian epic Mahabharata. Settlements grew from the time of the Mauryan Empire (c. 300 BC). Remains of seven major cities have been discovered in Delhi. The Tomara dynasty founded the city of Lal Kot in 736 AD. The Chauhan Gurjars of Ajmer conquered Lal Kot in 1180 AD and renamed it Qila Rai Pithora. The Chauhan king Prithviraj III was defeated in 1192 by the Afghan Muhammad Ghori. In 1206, Qutb-ud-din Aybak, the first ruler of the Slave Dynasty established the Delhi Sultanate. Qutb-ud-din started the construction the Qutub Minar and Quwwat-al-Islam (might of Islam), the earliest extant mosque in India. After the fall of the Slave dynasty, a succession of Turkic and Central Asian dynasties, the Khilji dynasty, the Tughluq dynasty, the Sayyid dynasty and the Lodhi dynasty held power in the late medieval period, and built a sequence of forts and townships that are part of the seven cities of Delhi. In 1398, Timur Lenk invaded India on the pretext that the Muslim sultans of Delhi were too much tolerant to their Hindu subjects. Timur entered Delhi and the city was sacked, destroyed, and left in ruins. Delhi was a major center of sufism (a mystic tradition of Islam) during the Sultanate period. In 1526, Zahiruddin Babur defeated the last Lodhi sultan in the First Battle of Panipat and founded the Mughal Empire that ruled from Delhi, Agra and Lahore.

The Mughal Empire ruled northern India for more than three centuries, with a five-year hiatus during Sher Shah Suri's reign in the mid-16th century. Mughal emperor Akbar shifted the capital from Agra to Delhi. Shah Jahan built the seventh city of Delhi that bears his name (Shahjahanabad), and is more commonly known as the Old City or Old Delhi. The old city served as the capital of the Mughal Empire since 1638. Nader Shah defeated the Mughal army at the huge Battle of Karnal in February, 1739. After this victory, Nader captured and sacked Delhi, carrying away many treasures, including the Peacock Throne. In 1761, Delhi was raided by Ahmed Shah Abdali after the Third battle of Panipat. At the Battle of Delhi on 11 September 1803, General Lake's British forces defeated the Marathas.

Delhi came under direct British control after the Indian Rebellion of 1857. Shortly after the Rebellion, Calcutta was declared the capital of British India and Delhi was made a district province of the Punjab. In 1911, Delhi was again declared as the capital of British India. Parts of the old city were pulled down to create New Delhi; a monumental new quarter of the city designed by the British architect Edwin Lutyens to house the government buildings. New Delhi, also known as Lutyens' Delhi, was officially declared as the seat of the Government of India and the capital of the republic after independence on 15 August 1947. During the partition of India thousands of Hindu and Sikh refugees from West Punjab and Sindh migrated to Delhi. Migration to Delhi from the rest of India continues, contributing more to the rise of Delhi's population than the birth rate, which is declining.In 1984, the assassination of Indira Gandhi (Prime Minister of India) led to violent backlash against the Sikh community, resulting in over two thousand seven hundred deaths. The Constitution (Sixty-ninth Amendment) Act, 1991 declared the Union Territory of Delhi to be formally known as National Capital Territory of Delhi. The Act gave Delhi its own legislative assembly, though with limited powers.

The National Capital Territory of Delhi is spread over an area of 1,483 km² (573 sq mi), of which 783 km² (302 sq mi) is designated rural, and 700 km² (270 sq mi) urban. Delhi has a maximum length of 51.9 km (32 mi) and the maximum width of 48.48 km (30 mi). There are three local bodies (statutory towns) namely, Municipal Corporation of Delhi (area is 1,397.3 km² (540 sq mi)), New Delhi Municipal Committee (42.7 km² (16 sq mi)) and Delhi Cantonment Board (43 km² (17 sq mi)).

The Great Gangetic Plains cover most of Delhi, as can be seen in this NASA image.Delhi is located at 28°61'N, 77°23'E, and lies in northern India. It borders the Indian states of Uttar Pradesh on East and Haryana on West, North and South. Delhi lies almost entirely in the Gangetic plains. Two prominent features of the geography of Delhi are the Yamuna flood plain and the Delhi ridge. The low-lying Yamuna flood plains provide fertile alluvial soil suitable for agriculture. However, these plains are prone to recurrent floods. Reaching up to a height of 318 m (1043 ft), the ridge forms the most dominating feature in this region. It originates from the Aravalli Range in the south and encircles the west, northeast and northwest parts of the city. Yamuna, a sacred river in Hinduism, is the only major river flowing through Delhi. Most of the city, including New Delhi, lies west of the river. East of the river is the urban area of Shahdara. Delhi falls under seismic zone-IV, making it vulnerable to major earthquakes.

With an estimated net State Domestic Product (SDP) of $ 95 billion as of 2005(INR) (for the year 2004–05), Delhi is the second largest commercial center in South Asia after Mumbai. Delhi has a per capita income of 53,976 INR which is around 2.5 times of the national average. The tertiary sector contributes 70.95% of Delhi's gross SDP followed by secondary and primary sectors with 25.2% and 3.85% contribution respectively. Delhi's workforce constitutes 32.82% of the population showing an increase of 52.52% between 1991 and 2001. Delhi's unemployment rate decreased from 12.57% in 1999–2000 to 4.63% in 2003. In December 2004, 636,000 people were registered with various employment exchange programmes in Delhi.

In 2001, the total workforce in all government (union and state) and quasi government sector was 620,000. In comparison, organised private sector employed 219,000. Delhi's service sector has expanded due in part to the large skilled English-speaking workforce that has attracted many multinational companies. Key service industries include information technology, telecommunications, hotels, banking, media and tourism. Delhi's manufacturing industry has also grown considerably as many consumer goods industries have established manufacturing units and headquarters in and around Delhi. Delhi's large consumer market, coupled with the easy availability of skilled labour, has attracted foreign investment in Delhi. In 2001, the manufacturing sector employed 1,440,000 workers while the number of industrial units was 129,000. Construction, power, telecommunications, health and community services, and real estate form integral parts of Delhi's economy. Delhi's retail industry is one of the fastest growing industries in India. However, as in the rest of India, the fast growth of retail is expected to affect the traditional unorganized retail trading system.