The origins of Indian drama remain a mystery. One can point to more or less vague similarities that suggest possible influence from Vedic religious ritual and recitation, shamanistic performance, and temple dance. These and others all are reasonable possibilities, but how and when these disparate elements merged into drama are unknown. Indian drama simply appears in the early centuries CE. This date is considerably later than that for Greek drama, and both linguistic and historical evidence suggest that Greek drama was known in India (probably introduced by Alexander in the fourth century BCE). However, Indian drama is so different from Greek drama in staging and worldview that one cannot fruitfully look to Greek drama as the source of Indian drama (or, for that matter, as a significant influence on Indian drama). Indian drama is a rich melange of speech, song, dance and instrumental music. It uses make-up (and so an actor may play more than one role) but does not use masks. Unlike Greek theater, female characters were portrayed by women. Indian drama uses complex and often subtle formalized hand gestures (mudras [muh DRAHZ] ) that would be impossible in the vastnesses of a Greek theater. The unrelenting gloom of Greek drama -- "suffer and learn" -- has no place in Indian drama, which prefers a range of emotions (mostly positive), and a happy ending. Indian drama, like Greek drama, tends to draw on historical legends for its subject matter. Shakuntala, for example, is based on a story from the epic Mahabharata. However, that story is itself an ancient and well-known fairytale. Thus the audience is assured that, while there may be dark moments, everything will end "happily ever after" -- a far cry from Greek tragedy. And finally, Greek tragedy and Indian drama have very different approaches to emotion. Greek tragedy, in Aristotle's formulation, strives for catharsis; that is, it elicits in viewers the emotions of pity and fear that are purged with the drama's resolution. Indian drama seeks to evoke rasa, a range of emotional responses that combine to transcend any single emotional response. That is, like meditation, drama has the potential to momentarily suspend the cycle of samśara and temporarily achieve mokśa.

The elements of Indian classical drama have been discussed in a work known as the Natyashastra ("Treatise on Drama"). The work's relation to Indian drama is often compared to that of Aristotle's Poetics for Greek drama. Natyashastra is traditionally attributed to an individual named Bharata and dated to the second century BCE to the second century CE. However, textual evidence argues that the work is a compilation by multiple authors, and its present form probably dates to around 800 CE. Nevertheless, it is an invaluable guide to an understanding of Shakuntala.

The Natyashastra specifies ten varieties of "major drama," (Rupaka), of which the most common is the Nataka. This is the genre of Shakuntala. A Nataka typically has five to ten acts; its subject matter is a perceived historical event, and its central character is an important figure in society. (Shakuntala is unusual in featuring a heroic female).