Supposing you were to go trolling around in Urdu, and its direct ancestors, Persian and Arabic, for a possible etymology. What would you come up with? The –stan suffix seems a straightforward place to begin as it occurs in so many other toponyms, such as Afghanistan, Kurdistan, Hindustan – and even Kafiristan, as immortalized by Rudyard Kipling.* (Note that, as tempting as it is to suppose so, the Turkish Istanbul is not from the same root; it actually derives from Greek. That’s another story for another day, so in the meantime, I’ll just refer you to They Might Be Giants.) So, the suffix comes from the Urdu stān “a termination denoting place, situation; added to words ending in a vowel, as hindūstān, the place or country of the Hindūs; if the word end [sic] with a consonant, istān is employed, as gul-istān, a rose-garden” . The Urdu stān goes directly back to Persian ستان (i)stán “place” (and still further, back to Sanskrit).
So far, so good. How about the first part, pak–? A very tantalizing possibility, now often adduced, is the Persian پاک pák “pure”, Urdu pāk “pure, clean, upright”. I wonder if this is distantly related to Chinese, specifically Cantonese paak, Guangdang baahk “white” – the source of English bok choy.
So, “land of the pure”, eh? Sounds good. But – it’s wrong. Or at least, it’s folk etymology after the fact. Pakistan is actually an acronym, as deliberately (if more artfully) constructed as the country itself. Choudhary Rahmat Ali coined the name in the middle 1930s, and its actual original meaning referred to the constituent cultures of the region: Punjabi + Afghani + Kashmiri + Sindhi + Balochistani (with the addition of an internal –i– for euphony). Later, when the actual nation was being put together by
Interesting how the name of the country - a superficially harmonious mélange of otherwise warring components, force-fit together and given a self-complimentary folk etymology after the fact – fits the country itself so well.
* Here’s another fun linguistic note: the kafir in Kafiristan means, basically, “infidel” in Arabic and Persian. The term is still in common (if unexpected) use, in the kaffir lime, whose leaves are a wonderfully aromatic ingredient in some of my favorite cuisines.
 Forbes, Duncan. A Smaller Hindustani and English Dictionary. London: Wm. H. Allen & Co., 1861, p.416. Note that Hindustani is a general term which applies both to Urdu and Hindi, essentially the same language, differing only in the use of the Arabic script for the former and the Devanagari script for the latter.
* My friend squire (see the comments) corrected me on this, then corrected my correction (offline). That’s why he gets paid to teach Social Studies and I don’t. But at least my mistakes are proof I don’t just copy my posts from Wikipedia. ;)