According to medieval Armenian sources, the settlement was first mentioned as Vararakn (means “rapid spring” in Armenian), a name that remained in use until 1847, when it was renamed Khankendi. Azerbaijani sources generally say that the settlement was founded in the late eighteenth century as a private residence for khans of the Karabakh Khanate, and was thus called Khankendi (Turkic for “the khan’s village”). After the Russian Empire gained the territory of the Karabakh Khanate through the Russo-Persian War of 1804–1813, the name Khankendi was charted on Russian maps.

In 1923 Khankendi was renamed Stepanakert by the Soviet government to honor Stepan Shahumyan, ethnic Armenian leader of the 26 Baku Commissars, and, after the Shushi pogrom had resulted in major destruction at Shushi, the former regional capital, Stepanakert was made the capital of the Nagorno-Karabakh Autonomous Oblast (NKAO). In time, Stepanakert grew to become the region’s most important city (a status it received in 1940). Its population rose from 10,459 in 1939 to 33,000 in 1978.

In 1926, municipal authorities adopted a new city layout designed by the prominent Armenian architect Alexander Tamanian; two additional designs for expansion were approved later on in the 1930’s and 1960’s, both of which retained Tamanian’s initial plan. Several schools and two “polyclinics” were established, and an Armenian drama theater was founded in 1932 and named after Maxim Gorky. Stepanakert served as Nagorno-Karabakh’s main economic hub, and by the mid-1980s there were nineteen production facilities in the city.

During the period of USSR, Stepanakert has served as the capital of the Nagorno-Karabakh Autonomous Oblast within the Azerbaijani Soviet Socialist Republic, between 1923 and 1991. With the independence of Artsakh in 1991, Stepanakert continued with its status as the political and cultural center of the newly-established republic, being home to all the national institutions: the Government House, the National Assembly, the Presidential Palace, the Constitutional Court, all ministries, judicial bodies and other government organizations.

Artsakh is a presidential democracy since the 2017 constitutional referendum. The Prime Minister’s post was abolished and the executive power is now residing with the President who is both the head of state and head of government. The president is directly elected for a maximum of two-consecutive five-year terms. The current President is Bako Sahakyan. On 19 July 2012, Sahakyan was re-elected for a second term. He was again re-elected to a third term on 19 July 2017. The National Assembly is a unicameral legislature. It has 33 members who are elected for 5-year terms.