Some decades ago, only the Kathmandu valley was called Nepal by many people in our country. So, it is important to know first that how the Kathmandu valley was formatted?
In ancient time the Kathmandu valley was the big lake with full of water. That big lake was called 'Nagdaha'. It was surrounded by hills on all sides. According to Swayambhu Puran, Manjushree Budhisatwa came to the Kathmandu valley with his disciples from China. He was looking for the right place to settle them. But it was full of water and there was no dried land to settle them. Finally, Manjushree cut the mountain at Katuwal Daha by his sword to make an outlet the water to flow out. When the land became dried, he founded the suitable human settlement called 'Manjupatan'.
Manjushree chose Dharmakar among his disciples to make king of the settlement. Like wise, the human started to live in Kathmandu from that time.