Yinchuan originally was a xian (county) under the name of Fuping in the 1st century BC; its name was changed to Huaiyuan in the 6th century AD. After the fall of the Tang dynasty in 907, it was occupied by the Tangut Xi-Xia dynasty, of which it was the capital. After the destruction of the Xi-Xia dynasty by the Mongols in 1227, it came under the rule of the Mongol Yuan Dynasty. Under the Ming (1368–1644) and Qing (1644–1911) dynasties, it was a prefecture of Ningxia. In 1928, when the province of Ningxia was formed from part of Gansu, it became the capital city. In 1954, when Ningxia province was abolished, the city was put in Gansu province; but, with the establishment of the Ningxia Hui autonomous region in 1958, Yinchuan once again became the capital.
Traditionally, Yinchuan was an administrative and commercial center. In the 1950s it had many commercial enterprises, and there were some handicrafts but no modern industry. The city has since grown considerably. Extensive coal deposits discovered on the eastern bank of the Yellow River, near Shizuishan, 100 km to the north, have made Shizuishan a coal-mining center.
Yinchuan, however, remains largely nonindustrial. The immediate plains area, intensively irrigated by a system developed as long ago as the Han (206 BC–AD 220) and Tang (618–907) dynasties, is extremely productive. Yinchuan is the chief agricultural market and distribution center for this area and also deals in animal products from the herds tended by nomads in the surrounding grasslands. It is a market for grain and has flour mills, as well as rice-hulling and oil-extraction plants. The wool produced in the surrounding plains supplies a woolen-textile mill. Yinchuan is a center for the Muslim (Hui) minority peoples, who constitute a third of the population. Yinchuan currently serves as a major trade route between Western cities such as Urumqi and the East.
On 23 July 1993 an airliner that was attempting its second takeoff