Chimi Lhakhang stands on a round hillock and was built in 1499 by the 14th Drukpa hierarch, Ngawang Choegyel, after the site was blessed by the Divine Madman, Lama Drukpa Kunley (1455–1529). In founding the site it is said that Lama Kuenley subdued the demon of Dochu La with his “magic thunderbolt of wisdom” and trapped it in a rock at the location close to where the chorten now stands.

Lama Kuenley was known as the Divine Madman for his unorthodox ways of teaching Buddhism by singing, humour and outrageous behaviour, which amounted to being bizarre, shocking and with sexual overtones. He is also the saint who advocated the use of phallus symbols as paintings on walls and as flying carved wooden phalluses on house tops at four corners of the eves. The monastery is the repository of the original wooden symbol of phallus that Kuenley brought from Tibet. This wooden phallus is decorated with a silver handle and is used to bless people who visit the monastery on pilgrimage, particularly women seeking blessings to beget children. The tradition at the monastery is to strike pilgrims on the head with a 10-inch (25 cm) wooden phallus (erect penis). Traditionally symbols of an erect penis in Bhutan have been intended to drive away the evil eye and malicious gossip.

The Lhakhang is of modest size, square in shape with a golden spire. Near the entrance to the Lhakhang, there is this small chorten which marks the location where the demon was subdued by Lama Kuenley. It is also said that the small chorten at the altar was made by Lama Kuenley himself. There are also frescoes painted on the walls of the monastery depicting the mad saint’s colourful life.