The British Irrawaddy Flotilla Company established the current town in the late 19th century on the Irrawaddy as a transshipment point for cargo between Upper and Lower Burma.
The district of Pyay encompasses the valley of the Irrawaddy, located between Thayetmyo, Hinthada and Tharrawaddy districts. Along the western side of Pyay District are the Arakan Mountains and along the eastern side are the Pegu Range. Pyay District's main towns are Pyay, Shwedaung, and Paungde.
The name "Pyay" means "country" in Burmese, and refers to the ruins of the main city of the Pyu city-states, Sri Ksetra (Burmese: သရေခေတ္တရာ, Sanskrit Śrīkṣetra "blessed place, country"), which is located 8 km (5.0 mi) to the south-east of modern Pyay and is in the village of Hmawa.
Much debate surrounds the construction of Sri Ksetra. Htin Aung suggests that Pyu might have been founded in 78 CE, based on the Sanskrit / Pyu Era. D. G. E. Hall and Gordon Luce, however, claim that civilisation of the Irrawaddy Valley could not have been possible before the 4th century, thus, attributing the founding of Sri Ksetra to 638, from which the current Burmese Kawza Era begins.
Sri Ksetra was the capital of the Pyu dynasty of Vikrama. The city was circular with walls enclosing about 46 km2 (18 sq mi), making it the largest walled city in south-east Asia during its peak. The city contained both housing and also farms, as evident from the remains of water ways and tanks which have been discovered.
The Chinese pilgrims Xuanzang and Yijing mentioned about Sri Ksetra in their mid-7th-century accounts. It is not known when precisely the Pyus abandoned Sri Ksetra and moved northward. It is speculated that their decline was due to the growth of the Irrawaddy river delta, cutting it off from coastal trade, and also from Mon and later Tai Shan incursions. Burmese chronicles state that when Anawrahta invaded the southern parts of modern-day Myanmar in 1057, he ordered the ruins of Sri Ksetra to be destroyed to prevent rebels from sheltering. The Burmese came to call the old Pyu center Pyi. The extensive ruins have been the subject of intensive archaeological investigation.
Called Prome by the British (alter the name that appear in the portugueses text of XVIIth century), the city became part of British territory after the Second Anglo-Burmese War in 1853. The town was taken by the British in 1825 during the Battle of Prome and again in 1852, on both occasions with hardly any opposition. In 1862, it was almost entirely destroyed by fire, and was afterwards relaid out in straight and broad streets. It was erected into a municipality in 1874, and since then great improvements have been made, including waterworks. During World War II the city was the site of the Battle of Prome. The city was later retaken by the British Army in May 1945.
To the south and south-east, the town is closed in by low pagoda-topped hills, on one of which stands the conspicuous gilded Shwesandaw Pagoda. The Shwesandaw Pagoda is a pagoda in the center of Pyay. It is the terminus for a railway from Yangon, which runs through the district.
To the west of Pyay, crossing Irrawaddy river through Nawaday bridge, stands the Shwebontha Muni Pagoda.
The north and north-east of the district is forest-covered, and contains numerous valleys and ravines, which unite in one large stream called the Naweng River. The most important of the plains lie in the south and south-west portions of Pyay, and extend along the whole length of the railway that runs between. There are, in addition large tracts of land covered by jungle, which are available for cultivation. The principal river is the Irrawaddy, which intersects the district from north to south; next in importance are the Thani and its tributaries and the Naweng system of rivers. In the hills near the capital the soil is of Tertiary formation, and in the plains it is an alluvial deposit.
Pyay has a tropical savanna climate (Köppen climate classification Aw). Temperatures are hot throughout the year, especially in the months before the monsoon from March to May when average maximum temperatures exceed 36 °C (97 °F). The winter months (December–February) are somewhat milder than the rest of the year. There is a winter dry season (December–April) and a summer wet season (May–November). Heavy rain falls in the summer, particularly in the month of July when 626 millimetres (24.6 in) of rain falls.
The main crop is rice, but some cotton and tobacco are grown, while the custard apples are famous. Sericulture is extensively carried on by a special class. The forests yield teak and cutch, cotton and silk-weaving are important industries; there are also manufactures of ornamental boxes, coarse brown sugar and cutch.
Pyay City has three universities. The universities are Pyay University (PU), Pyay Technological University(PTU), and Computer University, Pyay. Pyay University is situated near to the town centre of Pyay. PTU is situated near to Hnawgone village and Latkhoukpin village, a few miles away from Pyay. CU,Pyay is also quite a far distance from downtown.