Historically, two ethnic groups, the Sumerians and Akkadians, had dominated the region. An area rich in natural resources, and strategically located for trade routes and commerce, it was often under threat from outsiders throughout the region's history.

Old Babylonian period

At around 1900 BC, following the Sumerian revival under Ur-III, Semitic Amorites from west of the Euphrates gained control over most of Mesopotamia. During the first centuries of their rule, the government seat rested at Isin. They eventually formed a monarchical government over the city-state of Babylon. The three centuries of their rule is known as the Old Babylonian Period.

The Babylonians engaged in regular trade and influence with Western city-states; with Babylonian officials and troops passing to Syria and Canaan. Further, "Amorite" colonists were established in Babylonia for the purposes of trade.

The city of Babylon was given hegemony over Mesopotamia by their sixth ruler, Hammurabi (1780–1750 BC; dates highly uncertain). He was a very efficient ruler, giving the region stability after turbulent times, and transforming it into the central power of Mesopotamia.

Babylonian beliefs held the king as an agent of Marduk, and the city of Babylon as a "holy city" where any legitimate ruler of Mesopotamia had to be crowned. A natural development was the establishment of a bureaucracy, with taxation and centralized government, to allow the king to exert his control.

A great literary revival followed the recovery of Babylonian independence. One of the most important works of this "First Dynasty of Babylon", as it was called by the native historians, was the compilation of a code of laws. This was made by order of Hammurabi after the expulsion of the Elamites and the settlement of his kingdom. In 1901, a copy of the Code of Hammurabi was discovered by J. De Morgan and V. Scheil at Susa, where it had been taken as plunder. That copy is now in the Louvre.

Ammiditana, the great-grandson of Hammurabi, still titled himself "king of the land of the Amorites", and his father and son bore the Canaanite names of Abieshuh and Ammisaduqa. One of these Amorites, Abi-ramu or Abram by name, is the father of a witness to a deed dated in the reign of Hammurabi's grandfather.

The armies of Babylonia were well-disciplined, and they conquered the city-states of Isin, Elam, and Uruk, and the strong Kingdom of Mari. The rule of Babylon was even obeyed as far as the shores of the Mediterranean. But Mesopotamia had no clear boundaries, making it vulnerable to attack. Trade and culture thrived for 150 years, until the fall of Babylon in 1595 BC.

Kassite period

The last king of the dynasty was Samsu-Ditana, son of Ammisaduqa. He was overthrown following the sack of Babylon in 1595 BC by the Hittite king Mursili I, and Babylonia was turned over to the Kassites (Kossaeans) from the mountains of Iran, with whom Samsu-Iluna had already come into conflict in his 6th year. The Kassite dynasty was founded by Kandis or Gandash of Mari. The Kassites renamed Babylon "Kar-Duniash", and their rule lasted for 576 years. With this foreign dominion — that offers a striking analogy to the contemporary rule of the Hyksos in ancient Egypt — Babylonia lost its empire over western Asia. The high-priests of Ashur made themselves kings of Assyria. Most divine attributes ascribed to the Semitic kings of Babylonia disappeared at this time; the title of "god" was never given to a Kassite sovereign. However, Babylon continued to be the capital of the kingdom and the 'holy' city of western Asia, where the priests were all-powerful, and the only place where the right to inheritance of the old Babylonian empire could be conferred.

Neo-Babylonian Empire (Chaldean Era)

Through the centuries of Assyrian domination, Babylonia enjoyed a prominent status, or revolting at the slightest indication that it did not. However, the Assyrians always managed to restore Babylonian loyalty, whether through granting of increased privileges, or militarily. That finally changed in 627 BC with the death of the last strong Assyrian ruler, Ashurbanipal, and Babylonia rebelled under Nabopolassar the Chaldean the following year. With help from the Medes, Niniveh was sacked in 612, and the seat of empire was again transferred to Babylonia.

Nabopolassar was followed by his son Nebuchadnezzar II, whose reign of 43 years made Babylon once more the mistress of the civilized world. Only a small fragment of his annals has been discovered, relating to his invasion of Egypt in 567 BC, and referring to "Phut of the Ionians".

Of the reign of the last Babylonian king, Nabonidus (Nabu-na'id), and the conquest of Babylonia by Cyrus, there is a fair amount of information available. This is chiefly derived from a chronological tablet containing the annals of Nabonidus, supplemented by another inscription of Nabonidus where he recounts his restoration of the temple of the Moon-god at Harran; as well as by a proclamation of Cyrus issued shortly after his formal recognition as king of Babylonia. It was in the sixth year of Nabonidus (549 BC) that Cyrus, the Achaemenid Persian "king of Anshan" in Elam, revolted against his suzerain Astyages, "king of the Manda" or Medes, at Ecbatana. Astyages' army betrayed him to his enemy, and Cyrus established himself at Ecbatana, thus putting an end to the empire of the Medes. Three years later Cyrus had become king of all Persia, and was engaged in a campaign in the north of Mesopotamia. Meanwhile, Nabonidus had established a camp in the desert, near the southern frontier of his kingdom, leaving his son Belshazzar (Belsharutsur) in command of the army.

In 538 BC Cyrus invaded Babylonia. A battle was fought at Opis in the month of June, where the Babylonians were defeated; and immediately afterwards Sippara surrendered to the invader. Nabonidus fled to Babylon, where he was pursued by Gobryas, the governor of Kurdistan, and on the 16th of Tammuz, two days after the capture of Sippara, "the soldiers of Cyrus entered Babylon without fighting." Nabonidus was dragged from his hiding-place, and Kurdish guards were placed at the gates of the great temple of Bel, where the services continued without interruption. Cyrus did not arrive until the 3rd of Marchesvan (October), Gobryas having acted for him in his absence. Gobryas was now made governor of the province of Babylon, and a few days afterwards the son of Nabonidus died. A public mourning followed, lasting six days, and Cambyses accompanied the corpse to the tomb.

Cyrus now claimed to be the legitimate successor of the ancient Babylonian kings and the avenger of Bel-Marduk, who was assumed to be wrathful at the impiety of Nabonidus in removing the images of the local gods from their ancestral shrines, to his capital Babylon. Nabonidus, in fact, had excited a strong feeling against himself by attempting to centralize the religion of Babylonia in the temple of Merodach (Marduk) at Babylon, and while he had thus alienated the local priesthoods, the military party despised him on account of his antiquarian tastes. He seems to have left the defense of his kingdom to others, occupying himself with the more congenial work of excavating the foundation records of the temples and determining the dates of their builders.

The invasion of Babylonia by Cyrus was doubtless facilitated by the existence of a disaffected party in the state, as well as by the presence of foreign exiles like the Jews, who had been planted in the midst of the country. One of the first acts of Cyrus accordingly was to allow these exiles to return to their own homes, carrying with them the images of their gods and their sacred vessels. The permission to do so was embodied in a proclamation, whereby the conqueror endeavored to justify his claim to the Babylonian throne. The feeling was still strong that none had a right to rule over western Asia until he had been consecrated to the office by Bel and his priests; and accordingly, Cyrus henceforth assumed the imperial title of "King of Babylon."

A year before Cyrus' death, in 529 BC, he elevated his son Cambyses II in the government, making him king of Babylon, while he reserved for himself the fuller title of "king of the (other) provinces" of the empire. It was only when Darius Hystaspis ("the Magian") acquired the Persian throne and ruled it as a representative of the Zoroastrian religion, that the old tradition was broken and the claim of Babylon to confer legitimacy on the rulers of western Asia ceased to be acknowledged. Darius, in fact, entered Babylon as a conqueror.

After the murder of Darius, it briefly recovered its independence under Nidinta-Bel, who took the name of Nebuchadnezzar III, and reigned from October 521 BC to August 520 BC, when the Persians took it by storm. A few years later, probably 514 BC, Babylon again revolted under Arakha; on this occasion, after its capture by the Persians, the walls were partly destroyed. E-Saggila, the great temple of Bel, however, still continued to be kept in repair and to be a center of Babylonian patriotism, until at last the foundation of Seleucia diverted the population to the new capital of Babylonia and the ruins of the old city became a quarry for the builders of the new seat of government.