Hyderabad is also known as Bhagya Nagaram (translation: Bhagya meaning wealth; nagaram meaning city) in Telugu. Theories explaining the origins and etymology behind Hyderabad's name differ. A popular theory suggests that after founding the city, Quli Qutb Shah fell in love with and married a local Banjara girl known as Bhagyamathi and named this city after her. Upon her conversion to Islam, Bhagyamathi changed her name to Hyder Mahal and the new city's name was correspondingly changed to match it, resulting in the eponymous name Hyderabad (literally, "the city of Hyder"). Sultan Quli Qutb Mulk was the founder of the Qutb Shahi dynasty, the ruling family of the Golconda. The dynasty, previously a feudatory of Bahmani sultanate, declared independence in 1512. Muhammad Quli Qutb Shah, a ruler of the dynasty, founded the city of Hyderabad on the banks of the Musi River in 1591; this relocation was intended to relieve a water shortage the dynasty had experienced at their old headquarters at Golconda. He also ordered the construction of the Charminar, the iconic monument of the city, in 1591, reportedly in gratitude to the Almighty for arresting the plague epidemic before it did irreversible damage to his new city. As Qutb Shahi power and fortune rose during the 16th and early 17th centuries, Hyderabad became a center of a vibrant diamond trade. Golconda diamond mines are the birth place of the most famous diamonds in the world viz. Darya-ye Noor, Hope Diamond and importantly Koh-i-Noor, the crown jewel of Queen Elizabeth. They contributed to the growth and development of Indo-Persian and Indo-Islamic literature and culture in Hyderabad. Some of the sultans were known as patrons of local Telugu culture as well. In the 16th century the city grew to accommodate the surplus population of Golconda and eventually became the capital of the Qutb Shahi rulers. Hyderabad became known for its gardens (called baghs in vernacular) and its comfortable climate.Mughal emperor Aurangzeb captured Hyderabad in 1687 and during this short Mughal rule, the fortune of Hyderabad declined. Soon, the Mughal-appointed governors of the city gained more autonomy. In 1724, Asaf Jah I, who was granted the title Nizam-ul-Mulk ("Governor of the country") by the Mughal emperor, defeated a rival official to establish control over Hyderabad. Thus began the Asaf Jahi dynasty that ruled Hyderabad until a year after India's independence from Britain. Asaf Jah's successors ruled as the Nizams of Hyderabad. The rule of the seven Nizams saw the growth of Hyderabad both culturally and economically. Hyderabad became the formal capital of the kingdom and Golconda, the former capital, was all but abandoned. Huge reservoirs, like the Nizam Sagar, Tungabhadra, Osman Sagar, Himayat Sagar, and others were built. Survey work on Nagarjuna Sagar had also begun during this time; the actual work was completed by the Government of India in 1969. The wealth and grandeur of the Nizams is demonstrated by the fabled Jewels of The Nizams which is a tourist attraction. After the Indian independence in 1947, under the terms of independence from the British, the Nizam opted for independence or accession to the newly created Pakistan. India, then, implemented an economic blockade and forced Hyderabad state to sign a Standstill Agreement with the Indian Union.
On September 17, 1948, more than a year after India had gained independence, the Nizam signed the Instrument of Accession to the Indian Union. On November 1, 1956, the states of India were reorganized on linguistic grounds. The territories of the State of Hyderabad were divided between newly created Andhra Pradesh, Bombay state (later Maharashtra), and Karnataka. Hyderabad and the surrounding areas were added to Andhra Pradesh, based on the Telugu speaking community. Thus, Hyderabad became the capital city of the new state of Andhra Pradesh.