Several etymologies have been put forward as to the origin of the name of the province. During the Middle Ages, for example, Arab geographers stated that the name meant "cloud city". It has also been interpreted to mean "upper country". A more recent etymology that suggests that Abarshahr derives from Aparn-xšahr, "land of the Aparni" is considered the most accurate.
The province was formed during the reign of Shapur I as part of his efforts to establish greater centralisation in the empire, and was made up of the vassal kingdom of Satarop, who had declared fealty to Shapur's father, Ardashir I, after his victory over the last Parthian king, Artabanus V, at the Battle of Hormozdgān in 224 AD. The city of Nishapur (Middle Persian: Nēw-S̲h̲āhpūr "good city of Shapur) was founded or rebuilt by Shapur I as the administrative capital of Abarshahr, close to the temple of Adur Burzen-Mihr, home to one of three "Great Fires" held sacred by Zoroastrians. Nishapur was considered a more secure location than the former capital of the province, Susia, against raids from nomadic tribes.
The governor of Abarshahr is attested to have held the unique title of kanarang, distinguished from the title of marzban given to governors of frontier provinces.