In October 1978, Master Sheng Yen answered the invitation of the founder of the College of Chinese Culture, Dr. Chang Chi-yun, to teach graduate courses in the Department of Philosophy, and be the Director of the China Academy Graduate School of Buddhist Studies. After two years of preparation, the Academy started to open for admission in August 1981. When the College of Chinese Culture reformed into the Chinese Culture University in 1984, the China Academy Graduate School of Buddhist Studies ceased to take new applicants. Then Master Sheng Yen relocated the Academy to where the Institute of Buddhist Culture was in the fall of 1985 and renamed it Chung-Hwa Institute of Buddhist Studies (CHIBS). CHIBS passed the requirement of the Ministry of Education and became a formal higher education facility in 1987.

Since Master Sheng Yen became more involved in teaching Dharma in the West later, he asked Prof. Fang Ning-shu to take over the Director of the Institute in 1992, and subsequently, Prof. Lee Chih-fu took over the Director position in 1996. After the first stage of Dharma Drum Mountain World Center for Buddhist Education in Jinshan was completed in 2001, CHIBS and Library and Information Center relocated to the campus. At the same time, DDM Sangha also established Dharma Drum Sangha University which set the preliminary facilities of higher education in DDM.