This temple was built during the Tang Dynasty (618-907) on Mount Wutai, near the town of Taihuai, Shanxi province and is reputed to be the place where the Bodhisattva Manjusri stayed and preached with a magic lantern, hence the earlier name, "Luo Fo", meaning a Bodhisattva resided (here). The current name was given during the Qing Dynasty (1644-1911), when it went from a monks' temple to a lama temple, which is different from Han Buddhism.

Buddhist Sutras say Sakyamuni had a son named Rahula before he became a monk and Rahula followed in his father's footsteps at the age of 15 and became one of Sakyamuni's top students. The current name is a short form of Rahula in Chinese (Luo Houluo), meaning a place where all living creatures can avoid torment.

The temple covers 15,700 square meters and has six yards, more than 100 rooms, and 16 halls and other interesting places such as mountain gates and guest halls. The most famous item is a wooden device in Buddhist Sutras hall, a 3-meter-tall lotus, with a large, round plate carved with sea waves and 18 arhats (Bodhisattvas). There are also Buddha statues and the four deva-kings on the round platform. The wooden lotus is delicate, and when the mechanical mechanism is turned on, the lotus "blooms" and you see four golden Amitabhas seated back-to-back, a spectacular sight. But when the mechanism turns, the red petals fold up and hide the Amitabhas. Lamaism followers delight in seeing the Amitabhas in the lotus and take it as a sign of luck and their fate in Buddhism.

Near the temple, outside the mountain gate there are is pair of stone lions, the only ones on Mount Wutai and to the east of the gate is the Song, or Manjusri, Tower. Legend has it that the Bodhisattva Manjusri once appeared under a huge pine tree so the people replaced the pine with a column of Manjusri, to commemorate it, a 3-meter-tall tower. The Manjusri hall has a typical Lama statue of Manjusri riding a lion that is different from the other Manjusri’'s statues, in that this one's face is ivory-colored, instead of yellow, and has a book and a sword of wisdom on each side of the shoulders. Also, the lion is lying on a lotus rather than on a brick platform. The other statues and decorations in the temple have the traits of a typical lama temple.