Khyber is a Hebrew name of a fort. It was in the battle of Khyber near Madinia Munawwarah, where Hazrat Ali (RA) showed great chivalry and that is why, Khyber was founded in the present Khyber Pass by the Pathans, on settlement in 8th century A.D. Similarly, Ali Masjid was founded in the memory of Hazrat Ali (RA).

Khyber Pass has very rich history, Buddhism spread through this pass to Afghanistan and the stupas at Ali Masjid and Sphola bear witness to it. Many a battles were fought here by the Afghans against the invading armies. Amir Taimur built a prison in the pass, which is visible from Michi Post. Akbar the Great built a fortress at Kafirkot, near Charbagh. The Mughal Army of Aurangzeb was massacred near Landikotal in 1672 AD. The Sikhs built a strong fort at Jamrud where General Hari Singh Nalwa was killed in 1837.

The agency headquarters are in Peshawar in winter when the tribes migrate to the comparatively warmer Khajuri plains just beyond the Bara market town (5 miles from Peshawar). New water schemes on the Bara River are converting the semi arid and barren Khajuri Plains into valuable land for cultivation and habitation. Brick houses are appearing at a rapid rate. The summer headquarters are in Landi Kotal on the international border. Jamrud (deriving its name from the Iranian emperor Jamshed who ruled here some 2000 years ago) sits at the mouth of the Khyber Pass about ten miles from Peshawar. A Sikh fort that looks remarkably like a battleship still dominates the Jamrud area. The Kuki Khel Afridis live here. Shahgai fort, ten miles from Jamrud, with its squash courts and swimming pool, is one of the best maintained and striking on the frontier. Ali Masjid (Hazrat Ali, the son in law of the Holy Prophet is said to have prayed here) is the highest point and key to the pass.

The Khyber agency is the only afghan outpost to be annexed by the british. Its recorded history is long and colourful and begins with the arrival of the achaemenians, followed by the greek legions of Alexander the great, who were in turn succeeded by a series of invading hordes who thundered through on their way to the lush valley of Peshawar, tapering off with the british Indian expeditionary forces who marched in so bravely and stumbled out so disastrously. Numerous memorials were carved on the rock faces to the british Indian regiments who gradually wrested the pass from the Pathans and the afghans.