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In the early 2nd century BC, a tribe on the Central Asian frontier of China called Hsiung-nu defeated a neighboring one known as Yueh-chih. After more conflict, the survivors of the Yueh-chih were dislocated west, passing down the Ili river valley and along the southern shore of lake Issyk Kul. This movement also pushed Saka tribes (and others) ahead of them. Sometime between 145 and 125 BC, these nomad invaders burst into Bactria and Parthia.

A generation later, they were pressing into the Kabul valley and onto the Punjab plain. At around the beginning of the Christian era, one of the five Yueh-chih chiefs, K'iu-tsiu-k'io, attacked and defeated the others, leaving his clan in control; the Kuei-shang (Kushans).

Kujula Kadphises (30-80 AD) established the Kushan dynasty in 78 AD by taking advantage of disunion in existing dynasty of Pahalava (Parthian) and Scytho-Parthians, and gradually wrested control of southern prosperous region, which is the northwest part of ancient India, traditionally known as Gandhara (now Pakistan). It was his grandson Vima Kadphises who made Kushan a paramount power of northern India. His reign saw emergence of Kushan empire when he conquored north-western India (modern Punjab). Soon he came under influence of Hinduism (most likley embraced it for good) and took opportunity to proclaim himself Mahishwara, another name for Lord Shiva, on his coins (Shiva is a prominent Hindu god). Kushan kings introduced gold and copper coins, a large number of them have survived till today. It was the Kushan emperor, Vima Kadaphises who introduced the first gold coins of india. Kushan empire covered north west of India (includes Pakistan and modern Afganistan) and northern India. Ample evidences of trade with China, cental Asia, Egypt and Rome are available which made their economy very strong and kingdom wealthy and prosperous.