The city is part of the historic location of Sumer, one of the ports from which Sinbad the Sailor journeyed. It played an important role in early Islamic history and was built in 636 (14 AH). Basra is consistently one of the hottest cities in Iraq, with summer temperatures regularly exceeding 50 °C (122 °F). In April 2017, the Iraqi Parliament recognized Basra as Iraq's economic capital.
The city was called by many names throughout its history, Basrah being the most common. In Arabic the word baṣrah means "the overwatcher", which might have been an allusion to the city's origin as an Arab military base against the Sassanids. Others have argued that the name is derived from the Aramaic word basratha, meaning "place of huts, settlement".
The present city was founded in 636 as an encampment and garrison for Arab tribesmen constituting the armies of the Rashid Caliph Umar a few kilometres south of the present city, where a tell still marks its site. While defeating the forces of the Sassanid Empire there, the Muslim commander Utbah ibn Ghazwan erected his camp on the site of an old Persian settlement called Vaheštābād Ardašīr, which was destroyed by the Arabs. The name Al-Basrah, which in Arabic means "the over watching" or "the seeing everything", was given to it because of its role as a military base against the Sassanid Empire. However, other sources claim the name originates from the Persian word Bas-rāh or Bassorāh meaning "where many ways come together".
In 639 Umar established this encampment as a city with five districts, and appointed Abu Musa al-Ash'ari as its first governor. Abu Musa led the conquest of Khuzestan from 639 to 642 and was ordered by Umar to aid Uthman ibn Abu al-ʿAs, then fighting Iran from a new, more easterly miṣr at Tawwaj. In 650, the Rashidun Caliph Uthman reorganised the Persian frontier, installed ʿAbdullah ibn Amir as Basra's governor, and put the military's southern wing under Basra's control. Ibn Amir led his forces to their final victory over Yazdegerd III, the Sassanid King of Kings.
In 656, Uthman was murdered and Ali was appointed Caliph. Ali first installed Uthman ibn Hanif as Basra's governor, who was followed by ʿAbdullah ibn ʿAbbas. These men held the city for Ali until the latter's death in 661.