Constructed by Ngawang Namgyal, 1st Zhabdrung Rinpoche, in 1637–38,[1][3] it is the second oldest and second-largest dzong in Bhutan and one of its most majestic structures.

[5] Punakha Dzong was the administrative center and the seat of the Government of Bhutan until 1955 when the capital was moved to Thimphu.

In his dream, prompted by the psychic powers of the Zhabdrung, he had a clear vision of a palace for Guru Rinpoche.

In 1639, a commemorative chapel was erected to house the arms seized from the Tibetans who were defeated by the Bhutanese on this spot.

The Zhabdrung also set up a monastic order with 600 monks (brought from Cheri Gompa of upper Thimphu valley) and he lived here till his death.

The same year, Punakha Dzong was the site of the coronation of Sir Ugyen Wangchuck as the first Druk Gyalpo.

[10] From 1744 to 1763, the dzong was enlarged substantially during the rule of the 13th desi, when Sherab Wangchuk was the chief abbot of Bhutan.

[1][2][4][6] It is a six-storied structure with a central tower or utse at an average elevation of 1,200 m (3,900 ft) with a scenic, mountainous background.

However, the place is visited by the King and the Je Khenpo mainly to seek blessings before assuming their offices.

In 1996, flash floods in the Pho Chu river damaged the large stupa and caused several deaths.

[6] A covered wooden cantilever bridge crossing the Mo Chu river was built together with the Dzong in the 17th century.

In 2006, work started on a new wooden cantilever bridge in the traditional style, with a free span of 55 m (180 ft).

[2] The rangjung "self-created" image of Avalokiteśvara enshrined in the utse of the dzong (brought by the Zhabdrung from Tibet) is displayed during the festival.

In this theatrical display, which was conceived by the Zhabdrung, a mock throwing of a relic to the Mo chu river is dramatized.

[6] The final day of the festival marks the display of an image of Zhabdrung followed by a group dance performance by 136 pazaps, dressed as warriors, in the main courtyard.

The Monks led by the Je Khenpo of the Dzong then parade to the Mo chu river bank with lot of fan fare.