Etymology
Khouzi is referred to as people who make raw sugar from sugar cane fields of northern Sassanian planes up to Dez River side in Dezful. Khouzhestan has been the land of Khouzhies who used to cultivate sugar cane even to day in Haft Tepe.The name Khuzestan means "The Land of the Khuzi", refers to the original inhabitants of this province, the "Susian" people (Old Persian "Huza", Middle Persian "Khuzi" (the Shushan of the Hebrew sources) in the same evolutionary manner that Old Persian changed the name Sindh into Hind"). The name of the city of Ahwaz also has the same origin as the name Khuzestan., being an Arabic broken plural from the compound name, "Suq al-Ahwaz" (Market of the Huzis)--the medieval name of the town, that replaced the Sasanian Persian name of the pre-Islamic times.
The southern half of the province (south of the Ahwaz Ridge) was still known as "The Khudhi or The khooji" until the reign of the Safavid king Tahmasp I and the 16th century. By the 17th century, it had come to be known—at least to the imperial Safavid chancery as Arabistan. The great history of Alamara-i Abbasi by Iskandar Beg Munshi, written during the reign of Shah Abbas I the Great, regularly refers to the southern half of the province as "Arabistan" and its ruler as the "wali of Arabistan," from whence Shah Abbas received troops. Some tribes from as far away as Yemen had settled the southern half of the province since the 7th century AD, giving rise to some of the most prominent Arab poets such as Abu Nuwas Ahwazi. They remain an integral part of Khuzistan up till now.
There have been many attempts at finding other sources for the name, but none have proved tenable.
Read more about this topic: Khuzestan Province
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