Shahbazgarhi is located on the ancient Indian Grand Trunk Road, which traverses the subcontinent from Afghanistan in the west to the Indus delta in the east, and has open fields and a small river which is the source of fresh water. All these traits made it a favourable place for army commanders and other travellers to set up camp there.
The name of the town comes from the Shahbaz, a fabled bird from Persian mythology, which also adorned the Achaemenid royal standard, and whose name literally means ''royal falcon''. Garhi or garh means ''fort'' in Urdu and Hindi (from Sanskrit gadha), thus making the meaning of the name ''fort of the royal falcon''. Seeing how the Shahbaz was part of the royal insignia of the Persian monarch, it is possible that Shahbazgarhi was the site of an Achaemenid fortress in ancient times.
The Mauryan emperor Ashoka set up two large inscriptions hewn into large rock boulders here in the 3rd century BCE. The inscriptions were written in the Kharoshthi script, an ancient Indian script which was developed after contacts with the Persians, who occupied Gandhara (northwestern India and northern Pakistan) and used the Semitic Phoenician and Aramaic scripts, which are the direct ancestors of Kharoshthi. The epigraphs are the oldest written texts in South Asia, and are on the UNESCO World Heritage Tentative List in the Cultural category. Due to its favourable location, Shahbazgarhi used to be a thriving city surrounded by Buddhist monasteries and stupas.