Dharamsala has been connected with Hinduism and Buddhism for a long time, with many monasteries having been established there in the past. In the 8th century, however, these monasteries are believed to have declined, with traditional Hindu building styles experiencing a revival. The local Gaddi people are now almost all Hindu, and for the most part worship many gods and goddess (such as Durga).
In 1848, the area was annexed by the British, and a year later, a military garrison was established in the town. Dharamsala eventually became the administrative capital of Kangra District in 1852. It became a popular hill station for the British working in or near Delhi, offering a cool respite during the hot summer months.

Since 1959, Dharamsala, has become the Headquarters of the Tibetan Government in Exile, prompting many tourists to refer to it as "Little Lhasa". Dharamsala is choc-a-bloc with tourists, traders and seekers of knowledge.

There is an almost regular traffic to His Holiness's Palace, and the surrounding Namgyal Monastery. Situated a little below the main town is the picturesque Dip Tse Chokling Monastery. A few hours drive and you are transported to the serenely verdant surroundings of the Norbulinka Palace. Other than monasteries, Dharamsala is also the centre for Tibetan culture, with the Mentsee khang, the Tibetan Institute of performing Arts, the Institute of Tibetology and a well stocked Tibetan library at Khangchen Kyishong; all within walking distance.