The Tang dynasty (618-906 AD) was a period of unprecedented openness and prosperity for the Chinese court and it was then that Buddhism , originally imported from India through Central Asia around the first century AD, gained acceptance and came for a time to be the dominant religion in China. In the eighth century there were over three hundred thousand Buddhist monks in China, and it was a period which saw the creation of much of the country's great religious art - above all the cave shrines at Luoyang (Henan), Datong (Shanxi) and Dunhuang (Gansu), where thousands of carvings of the Buddha and paintings of holy figures attest to the powerful influence of Indian art and religion.

Gradually, though, Buddhism too was submerged into the native belief system. Most schools of Indian Buddhism of the time taught that life on earth was essentially one of suffering, an endless cycle in which people were born, grew old and died, only to be born again in other bodies; the goal was to break out of this cycle by attaining nirvana, which could be done by losing all desire for things of the world. This essentially individualistic doctrine was not likely to appeal to the highly regimented Chinese, however, and hence it was that the relatively small Mahayana School of Buddhism came to dominate Chinese thinking. The Mahayana taught that perfection for the individual was not possible without perfection for all - and that those who had already attained enlightenment would remain active in the world (as Bodhisattvas ) to help others along the path. In time Bodhisattvas came to be ascribed miraculous powers, and were prayed to in a manner remarkably similar to that of conventional Confucian ancestor-worship. The mainstream of Chinese Buddhism came to be more about maintaining harmonious relations with Bodhisattvas than about attaining nirvana.

Another entirely new sect of Buddhism also arose in China through contact with Taoism. Known in China as Chan (and in Japan as Zen) Buddhism, it offered a less extreme path to enlightenment. For a Chan Buddhist it was not necessary to become a monk or a recluse in order to achieve nirvana - instead this ultimate state of being could be reached through life in accord with, and in contemplation of, the Way.

In short, the Chinese managed to marry Buddhism to their pre-existing belief structures with very little difficulty at all. This was facilitated by the general absence of dogma within Buddhist thought. Like the Chinese, the Tibetans , too, found themselves able to adapt the new belief system to their old religion, Bon , rather than simply replacing it. Over the centuries, they established their own schools of Buddhism often referred to as Lalaist Buddhism or Lamaism, which differ from the Chinese versions in minor emphases. The now dominant Gelugpa (or Yellow Hat) school, of which the Dalai and Panchen Lamas are members, dates back to the teachings of Tsongkhapa (1357-1419).