Dechencholing Palace was built in 1953 after the coronation of the third King of Bhutan, Druk Gyalpo Jigme Dorji Wangchuk, following the death of his father, Druk Gyalpo Jigme Wangchuck, in 1952. The third king's son Jigme Singye Wangchuck was born here on 11 November 1955. Later, one hundred thousand Raksha Thotreng rituals were performed at the palace as a beneficial rite for the public enthronement of the Jigme Singye Wangchuck in 1974.
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The palace is frequently used for international delegations, especially those with India. Indian ambassadors regularly visit the palace to discuss international relations between India and Bhutan. It is also the venue for hosting luncheons and banquets for Head of the States and other important guests of Bhutan.