The long history of Persian(Farsi) language has its roots in Ancient Persia. The historical course of Persian language is divided into three eras: the Old Era, the Middle Era, and the New Era. The current Persian (Farsi) language has its roots in Middle Persian, which in turn originates from Old Persian. Persian (Farsi) is the only Iranian language with three recorded historical courses and some remaining literature.
Persian language came into existence as one of the dialects of Pars tribe who had immigrated to Iranian plateau; following the reign of Achaemanid dynasty over vast lands in Iranian plateau and its surrounding regions, Persian (Old Persian at that time) became the prevalent and official language throughout that vast area.
Like all Indo-European languages, Old Persian had a dense and complicated grammar as well as diverse grammatical conjugations. Many non-Iranians residing in the Achaemenid empire’s territory came to learn Persian; this expanding trend is often named as one of the reasons which simplified Old Persian’s grammar.
In the last years of the Achaemenid Empire, constant linguistic simplifications had already transformed Old Persian into a primary form of Middle Persian. In the Parthian Empire, (a.k.a Arascid Empire) Persian was influenced by the Parthian language; however, during the Sassanid era Persian was turned into Iran's administrative and official language, leading to its expansion throughout a wide area. Gradually, Persian spread among the merchants and, later on, among other social classes.
The 3rd Century A.D. contains the first inscriptures of Sassanid kings in three languages: Parthian, Middle Persian, and Greek. Parthian was the language of the Arascid Empire, which gradually expanded their reigning territory from North Khorasan to all parts of Iran. Middle Persian was spoken by Sassanid kings who were indegionous to Fars Province, and managed to dethrone the last Arascid king and replaced him in Ctesiphon. The spoken language of this era was Parthian in Northern Iran, and Middle Persian in Southern Iran.
Four centuries of Sassanid dynasty reign witnessed fundamental changes in language. Since 4th century, Parthian was no longer the official language and all epigraphs were written in Persian.
Arthur Christensen, the renowned Danish Iranologist, believed that the prevalence of the Persian language in northern areas of Iranian plateau arose from the establishment of military centers in Khorasan province, which aimed to defend the territory of Sassanid monarchy against potential invasions by the inhabitants of Central Asia.
The conquest of Balkh by the Sassanid in 558 A.D. caused Bactrian language to be replaced by Persian, which was welcomed and accepted by the citizens of Balkh due to its far simpler grammar compared to Bactrian. This was the beginning of the spread of Persian throughout Central Asia.
In northern Iran, especially the province of Khorasan, Persian(Farsi) was highly influenced by the Parthian language, creating a new dialect of Persian (the dialect used in northern provinces at that time) which was different from the southern dialects (prevalent in Fars and Khuzestan provinces); once the Sassanid capital was moved to Ctesiphon and northern areas, the northern dialect which became more widespread in Ctesiphon was referred to as "Dari Persian" or "Darbari Persian" (originated from Persian word "Darbār", equivalent to "court" in English) in order to be distinguished from the southern dialect, the main dialect spoken in Fars region.
Thus, the more primitive dialects used in Fars province were named "Parsi (Farsi)", and the dialect which contained many elemnts from Parthian and was more inclined to the northern dialect was referred to as "Dari Parsi". For instance, the word " گپ" (gap) was commonly used in the southern dialect of Farsi and it meant “big”, while the word "بزرگ" (bozorg) conveyed the same meaning in the northern dialect.
Persian(Farsi) was the spoken language throughout the southern regions of Iran, from Khuzestan to Sistan. In the northern half of Iran, Persian was prevalent in cities and was the official language, but Parthian was still more widespread in the rural areas. In Balkh, Persian had become the official written language and was about to expand as the spoken language of the society. During this era, Persian had already become the intermediary language of commerce in Sogdia and Khwarezm.
These trends made the Parthian language obsolete even before the advent of Islam in Iran, superseded by (Middle) Persian. After the Arab invasion of Iran, Arabs preferred to use Dari to communicate with the local people, and Muslim soldiers in the East took Dari Persian with themselves to farther regions of Central Asia.