Bali Lhakhang was built during the eighth century by King Thrisong Detshen of Tibet. It was built after Paro Kyichu Lhakhang and Bumthang Jampa Lhakhang. The present location is in Bali village which used to be known as Bayul (land of monpas, over ruled by the evil beings) during that time. A Tibetan monk who represented the king came to this place and was looking for shelter, the people being influenced by evil forces denied to shelter the monk for a night. The monk was with a donkey and carrying a head of a JOWO (Maitreya Buddha) statue. The monk spent a night at the location of the present Lhakhang. Since people did not give him shelter, he decided to move away, but his donkey did not move. When the monk kicked his donkey to get up and walk it began to jump and make noise in a strange way. Then the donkey began to dig and some treasures were discovered from the earth (dip and dip dhen). Then the monk built the Lhakhang in that location as it was very auspicious sign.
The central figure is of Buddha Maitreya(JOWO). The head of the statue is said to be brought by the monk from Lhasa as per prophecy. The deity of the Lhakhang is called Dolay.
Presently it belongs to more than 29 households of the community and they celebrate a festival called Bali Bonku observed once in three years. The community also performs rituals on many auspicious days and duezangs.
The last minor renovation was done in 2008.