The monastery was built around the Taktsang Senge Samdup cave, where custom holds that the Indian Guru Padmasambhava meditated in the 8th century. He flew to this place from Tibet on the back of Yeshe Tsogyal, whom he transformed into a flying tigress for the purpose and landed at the cliff, which he "anointed" as the place for building a monastery. He established Buddhism and the Nyingmapa school of Mahayana Buddhism in Bhutan, and has been considered the “protector saint of Bhutan”. Later, Padmasmbahva visited Bumthang district to subdue a powerful deity offended by a local king. Padmasambhava's body imprint is stated to be imprinted on the wall of a cave near Kurje Lhakhang temple. In 853, Langchen Pelkyi Singye came to the cave to meditate and gave his name of Pelphug to the cave, "Pelkyi's cave". After he died later in Nepal, his body was said to have been miraculously returned to the monastery by the grace of the deity Dorje Legpa; it is now said to be sealed in a chorten in a room to the left at the top of the entrance stairway. The chorten was restored in 1982-83 and again in 2004

From the 11th century, many Tibetan saints and eminent figures came to Taktsang to meditate, including Milarepa (1040–1123), Pha Dampa Sangye (died 1117), the Tibetan yogini Machig Labdrön (1055–1145) and Thangton Gyelpo (1385-1464). In the latter part of the 12th century, the Lapa School was established in Paro. Between 12th and 17th centuries, many Lamas who came from Tibet established their monasteries in Bhutan. The first sanctuary to be built in the area dates to the 14th century when Sonam Gyeltshen, a Nyingmapa lama of the Kathogpa branch came from Tibet. The paintings he brought can still be faintly discerned on a rock above the principal building although there is no trace of the original one. The Taktsang Ugyen Tsemo complex, which was rebuilt after a fire in 1958 is said to date back to 1408. Taktsang remained under the authority of the Kathogpa lamas for centuries until the mid 17th century.

In the 17th century the well-known Tertön Pema Lingpa of Bumthang, who founded many monasteries in various parts of Bhutan, was also instrumental in creating religious and secular dance forms from his conception of the 'Zandog Pelri' (the Copper Colored mountain), which was the abode of the Guru Padmasambahva (which is the same place as the Paro Taktsang or Tiger's nest). This dance is performed in Paro as the Tsche festival. But it was during the time of Ngawang Namgyal of the Drukpa subsect, who fled Tibet to escape persecution by the opposing sect of the Gelugpa order (which dominated Tibet under the Dalai Lamas), that an administrative mechanism was established in Bhutan.

In due time, he established himself in Bhutan as a 'model of rulership' and was known as the "Shabdrung" with full authority. He wanted to establish an edifice at the Taktsang Pel Phuk site. It was during a Tibetan invasion of Bhutan in 1644-46 that Shabdrung and his Tibetan Nyingmapa teacher had invoked Padmasambhava and the protective deities at Taktsang to give them success over the invaders. He performed the rituals associated with the celebrations of Tshechu. Bhutan won the war against Tibet However, Shabdrung was not able to build a temple at Takstsang to celebrate the event, even though he very much wanted to do so.

The wish of Shabdrung to build a temple here, however, was fulfilled during the 4th Druk Desi Tenzin Rabgye (1638–96), the first, and only successor of Shabdrung Ngawang Namgyel a distant cousin from a collateral line descending from the 15th century ‘crazy saint’ Drukpa Kunley". During his visit to the sacred cave of Taktsang Pel Phuk during the Tshechu season of 1692 he laid the foundation for building the temple dedicated to Guru Rinpoche called the ‘Temple of the Guru with Eight Names’. It was a decision taken by Tenzin Rabgye while standing at the cave overlooking the Paro valley. At this time, he was leading the Tshechu festival of religious dances. At that time the only temples reported to be in existence, at higher elevations, were the Zangdo Pelri and Ugyen Tsemo

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For those without flying tiger concubines, getting to the Tiger’s Nest is significantly more difficult. There is a two hour climb from the valley floor, which is already quite high at 7,000 feet, to the Tiger’s Nest 3,000 feet above— 10,000 feet above sea level. As one climbs the well-maintained but very steep trail over ever more vertical switchbacks, the monastery seems to appear and disappear in and out of the trees and the mists. After two hours of a long slow climb—going slow is recommended to help manage the pace of the altitude—one arrives at the only beginning of the entrance to the Tiger’s Nest, a rock outcropping overlooking a vast chasm, with the monastery on the other side.

Beneath the promontory of rock, and across the chasm from the monastery, the cliff drops a couple of thousand feet to the gorge below. Carved into the exposed cliff face are stone steps; handrails have only recently been added. This is the way to the Tiger’s Nest monastery.

Despite reservations that visitors may have about navigating the intimidating steps, it’s common to see Bhutanese locals, including mothers carrying small babies, walking up the steps with ease. The steps lead down into the gorge, which provides the separation and isolation the Tiger’s Nest has enjoyed for all these centuries.

As one climbs into the canyon, a 100-meter high waterfall at the deep end of the canyon appears immediately in front, with the path traversing directly across its base. Once down and across the front of the water fall the steps start back up toward the Tiger’s Nest once again, over 700 steps in all.

Visitors can enter Paro Taktsang (after removing their shoes) and climb the several levels within, which contain three temples and a spectacular view. High and deep inside is the site where Padmasambabva is said to have meditated for three years, three months, three weeks, three days and three hours. You can feel the chill breath coming from inside the cave.

The return journey is much faster, but equally dramatic.