According to Wangchuk (2004), the story of Aja Nye dates back to around 830 AD. At that time, the Tibetan demon King, Khikha-rathoed (who had the head of a goat and the mouth of a dog), was banished to a deserted jungle in the south. Upon learning that the demon king was planning to live in the Aja valley, Guru Rinpoche set off from Tormi-jangsa, through Tashi Yangtse, to stop him. Guru Rinpoche spent over three months meditating in the Aja valley, waiting for the right time to suppress Khikha-rathoed. During this time, he also concealed several religious sites and treasures within the valley.
The cave located next to the Aja Chu is believed to have been inscribed with the letter Aa (ཨ) by Guru Rinpoche. According to tradition, there are said to be a hundred Aa (ཨ) inscribed on the walls of the cave, which is why the place is called Aa-ja (meaning “hundred Aa”). Some of these imprints can still be seen on the walls of the cave today.
In the 14th century, Terton Ugyen Lingpa was the first to discover the religious site of Aja Nye, followed by Terton Rigzin Goeki Dhemthrug. Guru Rinpoche had predicted that the ninth Karmapa, Wangchuk Dorji (1556-1603), would be the one to uncover and decipher the site. However, the ninth Karmapa instead asked his disciple, Lama Karma Jamyang, to do so.