The monastery was founded in 1447 by a disciple of Tsongkhapa, Genden Drup. Genden Drup was retroactively named the first Dalai Lama and he is enshrined in Tashilhunpo. Despite its association with the first Dalai Lama, Tashilhunpo was initially isolated from the mainstream of Gelugpa affairs, which were centered in the Lhasa region. 

The monastery's standing rocketed, however, when the fifth Dalai Lama declared his teacher-then abbot of Tashilhunpo-to be a manifestation of Amitabha. Thus Tashilhunpo became the seat of an important lineage line the Panchen Lamas. The title Panchen means great scholar and was the title traditionally bestowed on abbots of Tashihunpo. But with the establishment of the Panchen Lama lineage of spiritual and temporal leaders-second only to the Dalai Lamas themselves-the specter of possible rivalry was introduced into the Gelugpa order. Naturally it did not take long to emerge. The next Panchen Lama was declared ruler of Tsang and Western Tibet by the Qing Dynasty in China.