The word dinar comes from the Latin denarius, which was a silver coin. The name "dinar" is also used for Sasanid, Kushan, and Kidarite gold coints, though it is not known what the contemporary name was.
The first dinars were issued by the Umayyad Caliphate. Under the dynasties that followed the use of the dinar spread from Islamic Spain to Central Asia.
Although there was a dictum that the Byzantine solidus was not to be used outside of the Byzantine empire, there was some trade that involved these coins which then did not get re-minted by the emperors minting operations, and quickly became worn. Towards the end of the 7th century CE, Arabic copies of solidi – dinars issued by the caliph Abd al-Malik (685–705 CE), who had access to supplies of gold from the upper Nile – began to circulate in areas outside of the Byzantine empire. These corresponded in weight to only 20 carats (4.0 g), but matched with the weight of the worn solidi that were circulating in those areas at the time. The two coins circulated together in these areas for a time.
The first dated coins that can be assigned to the Muslims are copies of silver Dirhams of the Sassanian ruler Yazdegerd III, struck during the Caliphate of Uthman. These coins differ from the original ones in that an Arabic inscription is found in the obverse margins, normally reading "in the Name of Allah". The subsequent series was issued using types based on drachmas of Khosrau II, whose coins probably represented a significant proportion of the currency in circulation.
In parallel with the later Khosrau-type Arab-Sassanian coins, first issued under the Well-Guided Caliphs of Islam, a more extensive series was struck with Khosrau's name replaced by that of the local Arab governor or, in two cases, that of the Caliph. Historical evidence makes it clear that most of these coins bear Hijra dates. The earliest Muslim copper coins are anonymous and undated but a series exists which may have been issued during the Caliphates of Uthman or Ali. These are crude copies of Byzantine 12-nummus pieces of Heraclius from Alexandria.