The temple's name was derived from a dream that Emperor Godaigo had in which he saw a beam of light shining from the southeast where the wooden statue of Amitabha stolen from Kosho-ji Temple later appeared.
佛光寺の寺号は、後醍醐天皇が東南の方向から一筋の光りが差し込むという夢を見たという場所に、興正寺の盗まれた阿弥陀如来の木像が出てきたという霊験に由来する。