Andorra's independence is traditionally ascribed to Charlemagne, who recovered the region from the Muslims in AD 803, and to his son Louis I the Pious, who granted the inhabitants a charter of liberties. Charlemagne's grandson, Charles II, granted Andorra to the counts of Urgel, from whom it passed to the bishops of Urgel. Andorra's seven-century-old dual allegiance to two princes, one in Spain and one in France, originated in the late 13th century in a proprietary quarrel between the Spanish bishops of Urgel and the French heirs to the countship of Urgel. Andorra was subsequently governed jointly by representatives of the Spanish bishop of Urgel and of the French head of state, each of whom received an annual payment of a token tribute. This feudal system of government, the last in Europe, remained intact until 1993, when a constitution was adopted that greatly reduced the power of the coprinces and established separate executive, legislative, and judicial branches of government.

Andorra consists of a cluster of mountain valleys whose streams unite to form the Valira River. With only about 2 percent of the land cultivable, the traditional economy centred on the pasturing of sheep and the harvesting of modest quantities of tobacco, rye, wheat, olives, grapes, and potatoes. Industry was limited to processing these products and to handicrafts. From the 1950s tourism became one of Andorra's chief industries, exploiting the scenic attractions of the mountains and the area's excellent opportunities for winter sports. Because of the lack of customs duties and low or nonexistent taxes, Andorra in the late 20th century also became an important international centre of retail trade that attracted millions of shoppers from all over Europe with its duty-free imported consumer goods. There is no national monetary unit, and both French and Spanish currencies are used. No railway system exists, but good roads link Andorra with France and Spain.

The coprincipality has traditionally had a strong affinity with the region of Catalonia in northern Spain. Andorra's official language is Catalan; its institutions are based in Catalonian law, and a large proportion of the Spanish immigrants (or their descendants) in Andorra are Catalan. Most Andorrans are Roman Catholic, and the principality is part of the diocese of the See of Urgel. Nearly two-thirds of the population is urban.