In Sanskrit, Itihāsa(Itihasa) does not mean ‘History’ as we generally understand it now. The term ‘itiha‘ is an avyaya in Sanskrit, and means the course of tradition coming down through legacy. The location or position or ‘seat’ of such tradition is called itihāsa (itiha + āsa). In Brahmavarga of Amarakoṣa (Amarakosha), the term aitihya derives from itiha, and the explanation of aitihya suggests that it is through itiha , that the advice of maintaining tradition is given —
pāramparyopadeśe syādetihyamitihāvyayam.
Afterwards, in Svargavarga (Swargavarga), Amarakoṣa (Amarakosha) further says, “itihāsaḥ purāvṛttam.”

Amongst the Purāṇas (Purana; Mythological Scriptures), only Viṣṇupurāṇa (Vishnupurana), in one commentary by Śrīdharaśvāmi (Sridharaswami), itihāsa is defined at least three times — legends which relate the characters and virtues of several ṛṣi (rishi; seer or sage), devarṣi(devarshi; divine seer) and maharṣi (maharshi; great sage), and function as a code of behaviour for the future —

ārṣādi vahuvyākhyānaṃdevarṣicaritāśrayam

itihāsamiti proktaṁ bhaviṣyadbhuta-dharmadhṛk.

What is said in other places, is similar to the definition given in Amarakoṣa. Taking the indeclinable ‘ itiha’ there legacy-wise description of events is marked as ‘Itihāsa’–
itihyetyavyaṃ pāramparyopadeśābhidhāyāyi
tasyāsanas āsaḥ avasthānameteṣviti.

In ordinary sense, what we call history that comes in/with Purāṇa’s definition in Sanskrit. Vāyupurāṇa (Vayupurana) said — this happened in purākāla (purakala; ancient time) so its name is Purāṇa
yasmāt purā hyanitīdaṃ purāṇaṃ tena tat smṛtam.
Even considering that the real significance of the word Itihāsa lies in the word Purāṇa — the way the patterns of itihāsa are narrated, it can be assumed that since the Veda and through Upaniṣad (Upanishad), Śrautasūtra (Sarutasutra) and Gṛhyasūtra (Grihyasutra), if the chronology of events can be understood, it is also possible to find a chronological pattern of the kings and sages. And if these match with the ancient legends narrated in Purāṇas, they appear to be convincing and worthy of the sense of modern history as well. From this viewpoint, Mahābhārata (Mahabharata) is considered to be both itihāsa and purāṇa

dvaipāyanena yat proktaṁ purāṇaṁ paramarṣiṇā
bhāratasyetihāsasya puṇyāṁ granthārthasaṁyutām.
itihāsamimaṁ cakre puṇyaṁ satyavatisutaḥ
ithāsāḥ sahavyākhyā vividhāḥ śrutayo’pi ca.