The people of Bhutan can be divided into three broad ethnic categories--Ngalops, Sharchops, and Lhotsampas. The Ngalops make up the majority of the population, living mostly in the western and central areas. The Ngalops are thought to be of Tibetan origin arriving in Bhutan during the 8th and 9th centuries A.D. and bringing Buddhism with them. Most Ngalops follow the Drukpa Kagyupa discipline of Mahayana Buddhism. The Ngalops predominate in the government, and the civil service and their cultural norms have been declared by the monarchy to be the standard for all citizens.

The Sharchops, who live in the eastern section of Bhutan, are considered to be descended from the earliest major group to inhabit Bhutan. Most follow the Ningmapa discipline of Mahayana Buddhism. Sharchop is translated as "people of the east." The Ngalops and Sharchops are collectively known as Drukpas and account for about 74% of the population. The national language is Dzongka, but English is the language of instruction in schools and an official working language for the government.

The Lhotsampas are people of Nepali descent, currently making up 25% of the population. They came to Bhutan in the 19th and 20th centuries, mostly settling in the southern foothills to work as farmers. They speak a variety of Nepali dialects and are predominantly Hindu.