Dungtse Lhakhang, the little three storied chorten-shaped temple, was built in 1421 by Thangtong Gyelpo to subdue the ogress on the top of whose head it is said to be built. The 25th Head Abbot of Bhutan, Sherab Gyeltshen, restored it in 1841. The names of the Paro donors can still be seen written on the wooden pillars of the ground floor. Men of great stature and strength known as the “Nya goe” were employed in the construction to lift the massive pillars used in the temple. It is said that on the day of construction, the founder himself appeared in the form of five vultures, and circled the temple showering his blessings before taking flight to Tibet. One can also see the central tower (utse), the pinnacle of the temple, chained from four directions to the roof of the temple. It is believed that while the consecration was being performed the central tower moved, attempting to fly to Tibet. Thus to stop it from its flight the central tower was chained down.

This temple is unique in Bhutan as its paintings show the progressive stages of Tantric Buddhist philosophy as well as the most important deities and figures of the Drukpa Kagyudpa School.