The primary objective of establishing the Gilgit Agency was to bolster and fortify these regions, particularly in the context of concerns about Russian encroachment in the area.

The unit remained in existence till 1974, after which it was abolished by the Pakistani Prime Minister Zulfiqar Ali Bhutto and turned into the Federally Administered Northern Areas (later renamed to "Gilgit-Baltistan").

The Political Agent communicated with the central government in New Delhi via Peshawar (the capital of the North-West Frontier Province) instead of the Resident in Kashmir, reportedly for "security" reasons.

Under Article IV of The Treaty of Lahore, signed between the Maharaja Duleep Singh and the British Empire, the Sikhs ceded the territories between the rivers Beas and Indus as war indemnity.

The British Government having demanded from the Lahore State, as indemnification for the expenses of the war, in addition to the cession of territory described in Article 3, payment of one and half crore of Rupees, and the Lahore Government being unable to pay the whole of this sum at this time, or to give security satisfactory to the British Government for its eventual payment, the Maharajah cedes to the Honourable Company, in perpetual sovereignty, as equivalent for one crore of Rupees, all his forts, territories, rights and interests in the hill countries, which are situated between the Rivers Beas and Indus, including the Provinces of Cashmere and Hazarah.In the north, these territories included Gilgit (the present Gilgit District), Astore (the present Astore District) and Chilas (presently a tehsil of the Diamir District).

[13] By 1860, the three areas were constituted as a Gilgit wazarat (district), and the princely states of Hunza and Nagar to the northeast accepted the suzerainty of the Maharaja Ranbir Singh.

[14] The Treaty of Amritsar did not constrain the Maharaja from establishing relationships with external powers, and he is said to have had dealings with Russia, Afghanistan, China and Turkestan.

By 1889, the House of Ayasho had consolidated complete control over the regions of Punial, Gupis-Yasin, and Ishkoman, incorporating them as provinces under their rule.

To emphasize their authority over these territories, the ruling family named the newly unified state Takht-e-Punial translating to (Greater Punial).

[17][18] The British Raj, aiming to strengthen their hold over the area, installed the Ayasho family as perminent rulers and officially recognized the state as a Special Political District.

In 1974, the states of Hunza and Nagar and the independent valleys of Darel-Tangir, which were the de facto dependencies of Pakistan, were also incorporated into the Northern Areas.