According to legend, a long time ago a group of Thao hunters chased a rare and beautiful white deer for days and days, going up river valleys and across mountain ridges, until finally they entered the mountains of a place called Shueishalian. There they discovered the deep green waters of Sun Moon Lake, and moved their entire tribe to this beautiful place.  

The entire area around Sun Moon Lake, including today's Yuchih, Toushe, and Puli, was once known as Shueishalian. During the Cing Dynasty the original Thao settlers were joined by large numbers of Han Chinese and Pingpu (plains) Aborigines who moved in to cultivate the land, thus forming the cultural diversity of the area.

When the Japanese occupied Taiwan they channeled water from the upper Jhuoshuei River into the lake for the purpose of hydropower generation, substantially raising the water level and increasing the lake-surface area. The roads built by the Japanese to facilitate hydroelectric construction made travel to the area much more convenient, stimulating tourism at Sun Moon Lake and the development of the surrounding area.

After Taiwan was restored to China, the construction or renovation of Syuanguang Temple, Syuanzang Temple, Wunwu Temple, and Cihen Pagoda attracted even more tourists. This transformed Sun Moon Lake from the homeland of the Thao into a hydroelectric powerhouse and ultimately into a famous tourist destination.