According to a Dai legend, Xishuangbanna was discovered several thousand years ago by hunters chasing a golden deer. In Chinese historical records, the Dai people are mentioned as long ago as the Western Han Dynasty (second century BC). During the first and second centuries AD, Dai chieftains sent tribute missions to the Chinese capital at Luoyang, but the area’s remoteness limited further ties. In the eighth century, Dali, in north central Yunnan (see section on Dali, above) became the capital of Nanzhao, an independent state ruled by the Bai minority people.

In ancient times, Xishuangbanna was legendary for farming by elephants and the practice of tattooing. The region was known as "the land that rides on the back of elephants." Xishuangbanna got its name in Ming Dynasty (1570). While there is little written history to go on, Xishuangbanna has long been a place where the Dai, Hani, Yao, Bulang and Jinuo minorities live in compact communities and practicing their cultures, traditional arts and customs. In the history, the chiefs of Xishuangbanna all submitted to the rule of dynasties and would pay feudal leaders with presents of tamed elephants and trunks.Xishuangbanna is unique in that, even today, many of the minorities are dependant on the rain forests for all their daily needs.

Xishuangbanna was under the administrative rule of Nanzhao until its absorption into the Chinese empire in the 13th century. During the Yuan Dynasty (1279-1368), Xishuangbanna came under the nominal control of the central government. The Cheli Military and Civil Administration was formed in Jinhong at that time, and since then there has always been a representative of the ruling Chinese government there.

During the Nationalist period the central government strengthened its hold on Xishuangbanna, but did little to improve conditions in the area. In 1942 there was a major, but unsuccessful, uprising.

The Chinese Communist government asserted control over Xishuangbanna in February 1950 and began the reform of the administration. Most current leaders in the autonomous region are of the Dai, Aini, or Han nationalities. The Dai language and Chinese are used in all official transactions.