Kobo Daishi founded the temple after Dainichi Nyorai appeared in a purple cloud during his training, declaring 'This land is a sacred place.' He carved the deity's statue on the spot and built the temple immediately.

Dainichi-ji was burned during the Tensho era by forces of Chosokabe Motochika, then rebuilt in the early Edo period.

The temple's principal image switched in the Meiji era: an Eleven-Faced Kannon from the neighboring shrine replaced the original Dainichi Nyorai statue, which was demoted to a side position after centuries as the main deity.

Dainichi-ji is Temple No. 13 on the 88-temple Shikoku Pilgrimage in Tokushima.