Sources suggest that the Nobgang community was first established during the time of Sakya Rinchen (1710-59), the 9th Je Khenpo or Chief Abbot of Bhutan. It was also him who founded the place and gave the name Norbugang, the Gem Hill. Today, it is known as Nobgang, with Norbu pronounced in an abbreviated form as Nob.

It is said that when Je Sakya Rinchen was on retreat at a place overlooking Nobgang known as Jachung Karmo, he saw a glitter of light on the mound where the Nobgang Tsuglakhang temple stands today. Following continuous sighting of the glittering light, he sent a monk to take a look at the place where the glitter of light was seen. The monk came back with a stone that was the cause of the glittering light. Je Sakya Rinchen recognized the stone to be a rare and precious gem. The place was, thus, named Nobgang, the hill of a gemstone.

The first permanent structure in this place was the Nobgang Tsuglakhang temple, probably built between 1757 and 1759 as suggested by some sources. Popular oral accounts claim that the settlement around the temple began when monks and lay people alike began building their hermetic cottages surrounding the temple to receive teachings and to reside in retreat and meditation.

The village probably began to evolve when some hermits started their families, while others sold their cottages to other people who made them their permanent shelter and residence. A number of cases suggest that the ancestors of Nobgang were immigrants from other places, who would have resided as a hermit or bought a hermit’s cottage as the community of hermits turned into a regular village.