In 1757 the 9th Je Khenpo Shakya Rinchen, considered to be a reincarnation of Rechungpa (one of the two extraordinary disciples of Milarepa in Kagye Buddhist lineage), founded the Nalanda Monastery in Punkaha.
At the time when this monastery was built, the ancient Nalanda University in India was a very holy and sacred place. Bhutanese people made great efforts to visit this special holy place at least once in their lifetime. There were no roads and people had to walk to India. As a result the journey was very unsafe and people were at risk to be robbed or even worse. Once in India, people from Bhutan faced many difficulties including dealing with differences in food, culture, and language as well as being in an unfamiliar place. As a way of accommodating people’s desire to visit Nalanda, Gyalwa Shakya Rinchen Rinpoche built this monastery in Bhutan and named it after the Nalanda University in India.
Gyalwang Shakya Rinchen had completed the building of Phajoding in the monastery above Thimphu valley. Upon its completion he was wondering where the next site to build the next monastery. The monk body was moving their residence from Thimphu to Punakha, as was the traditional way to spend months in Punakha. When he was walking over Dochula mountain pass he saw eight vultures flying to a specific area that has now become the present Nalanda monastery. He through that maybe these vultures were the eight original scholars (pandits) from the Nalanda University in India. After seeing it he asked for a confirmation in a dream. Consequently the eight scholars appeared in his dream and gave a teaching to him. Based on seeing of the vulture choosing this site and the dream of the eight scholars, this site was chosen as the area in which to build Nalanda monastery.
During Gyalwang Shakya Rinchen’s lifetime, Nalanda monastery in Bhutan was a thriving Buddhist teaching institution with a renowned reputation. After Gyalwang Shakya Rinchen’s final thugham or Maha Samadhi, slowly the teachings stopped and the great institute lay dormant. Nalanda Monastery was restarted several times with different eachers but after the teachers departed the monastery would again be less inhabited with monks.
Eventually the uncle of His Majesty, the Fourth King Jigme Singye Wangchuck, Lopen Yoenten Gyaltsen requested permission from the King to open an official Buddhist Shedra (institute). In 1991 His Majesty gave permission for Nalanda Monastery to become a Shedra. Then in 1992 two lopens (teachers) began the Shedra with 20 monks. Over time the number of lopens and students increased. In 2014 there were 6 lopens and 125 students that range from 8 to 28 years old.