The reincarnation system for the Living Buddhas is the main point distinguishing Tibetan Buddhism from other forms of Buddhism.

The term Living Buddha emerged in the early Yuan Dynasty (1271-1368) when Emperor Kublai Khan honored Pagba, head of the Sagya Sect, by granting him the title "Buddha of the Western Paradise.'' Thereafter, eminent Tibetan monks we distinguished them in the practice of Buddhism were referred to as ''Living Buddha.'' However, the term Living Buddha was not recognized as a special title for a monk who became the successor of the deceased leader of a monastery until the eventual introduction of the Living Buddha reincarnation system.

In 1252 , Kublai Khan granted an audience to Pagba and Garma Pakshi, an eminent monk with the Garma Gagyu Sect. Garma Pakshi, however, sought the patronage of Monge Khan who proceeded to bestow him a gold-rimmed black hat and a golden seal of authority. Prior to his death in 1283, Garma Paksli penned a will to ensure the established interests of his sect. The will advised his disciples to locate a boy to inherit the black hat, with the instruction based on the premise that Buddhist ideology is eternal, and a Buddha would be reincarnated to complete the missions he had initiated. Garma Pakshi's disciples acted in accordance with the will and located the reincarnated soul boy of their master. The event marked the introduction of the Living Buddha reincarnation system for the Black-Hat Line of Tibetan Buddhism. During the Ming Dynasty (1368-1644), Emperor Yongle honored Black-Hat Living Buddha Garmaba as the ''Great Treasure Prince of Dharma,'' the first of the three "Princes of Dharma.'' The Living Buddha reincarnation system remains in operation today. On September 27, 1992, the Curpu Monastery in Doilungdeqen County, Lhasa, was the site of a grand ceremony marking the enthronement of the 16th Living Buddha Garmaba. The event marked a new page in th history of the Garma Gagye Sect.

Various sects of Tibetan Buddhism reacted to the introduction of the Living Buddha reincarnation system by creating numerous similar systems. During the Qing Dynasty (1644-1911) reign of Emperor Qianlong alone, 148 Grand Living Buddhas registered for reincarnation with the Board for Mongolian and Tibetan Affairs, with the number of registrants rising to 160 by the end of the dynasty. The most influential reincarnation systems have since been the Dalai and Bainqen Lama systems.