Kerman was found as a defensive outpost, with the name Veh-Ardashir, by Ardashir I, founder of the Sasanian Empire, in the 3rd century AD. After the Battle of Nahāvand in 642, the city came under Muslim rule. At first the city's relative isolation allowed Kharijites and Zoroastrians to thrive there, but the Kharijites were wiped out in 698, and the population was mostly Muslim by 725. Already in the eighth century the city was famous for its manufacture of cashmere wool shawls and other textiles. The Abbasid Caliphate's authority over the region was weak, and power passed in the tenth century to the Buyid dynasty, which maintained control even when the region and city fell to Mahmud of Ghazni in the late tenth century. The name Kerman was adopted at some point in the tenth century
Under the rule of the Seljuq Turks in the 11th and 12th centuries, Kerman remained virtually independent, conquering Oman and Fars. When Marco Polo visited Kerman in 1271, it had become a major trade emporium linking the Persian Gulf with Khorasan and Central Asia. Subsequently, however, the city was sacked many times by various invaders. Kerman expanded rapidly during the Safavid dynasty. Carpets and rugs were exported to England and Germany during this period.
In 1793 Lotf Ali Khan defeated the Qajars, and in 1794 he captured Kerman. But soon after he was besieged in Kerman for six months by Agha Mohammad Khan Qajar. When the city fell to Agha Mohammad Khan, angered by the popular support that Lotf Ali Khan had received,[clarification needed]many of the male inhabitants were killed or blinded, and a pile was made out of 20,000 detached eyeballs and poured in front of the victorious Agha Mohammad Khan. Many women and children were sold into slavery, and in ninety days the city turned into ruins. However, the Zoroastrians of Kerman who had been strong supporters of Lotf Ali Khan suffered the wrath of the founder of Qajar dynasty the most during this period.
The present city of Kerman was rebuilt in the 19th century to the northwest of the old city, but the city did not return to its former size until the 20th century.
The economy of Kerman is mostly based on farming, notably nut farming and also mining. Sarchashmeh Copper mine is the second biggest copper mine in the world after the one located in Chile. Pistachios are an important part of the economy in Kerman, with Kerman Province being the largest producer of pistachios in Iran and the world.
Carpet weaving is one of the main industries of the city, and the carpets produced there are renowned internationally. Carpet weaving is a very old tradition in Kerman. The oldest carpet discovered in Kerman, dates from about 500 years ago. Cotton textiles and goats-wool shawls are also manufactured.
A number of modern establishments such as textile mills and brickworks also have been constructed. The province's mineral wealth includes copper and coal.