The current monastery was founded in 1727 by the 8th Tai Situpa "Situ Panchen" with the great support of the Dharma King of Derge Temba Tsering. It is the seat of four lines of incarnate lamas, the best-known being the Tai Situpa as well as the Jamgon Kongtrul and the Second Beru Khyentse. The temple has historically been associated with the Karmapas: for instance, Rangjung Rigpe Dorje, 16th Karmapa, was enthroned first at Palpung before traveling to his main seat at Tsurphu Monastery in Ü-Tsang.