In 1850, as was their custom, the monks sent several of their treasured temple dogs to Manchu emperors in Peking, and the Chinese called these dogs Tibetan Shih Tzu Kou, or Tibetan Lion Dog. The dogs were bred specifically to please the emperors in each palace, and type varied.

In 1908, the Dalai Lama, Tibet's spiritual leader, sent some small dogs of Shih Tzu type to Tzu Hsi, Dowager Empress of the Manchu Dynasty. The Empress was a renowned breeder of Pekingese and added the Shih Tzu to her interests. At this time, three types of dogs were bred as palace companions with little difference in type but with different coat length. Tzu Hsi closely supervised the initial Shih Tzu breeding to maintain breed characteristics separate from the Pekingese, but after her death that same year, breeding practices became sloppy and cross-breedings with Pekingese and Pugs probably occurred.

For the next four years, there was much competition among the various palaces to produce dogs of the finest coats and colors, so breeding practices were tightly guarded secrets and records were not kept. Dogs of poor quality were sold in the marketplace, and dogs of fine quality were often smuggled out of the palaces and given as gifts to foreign visitors or Chinese noblemen. Breed identity was often confused.

The Manchu Dynasty perished in 1912 when Tzu's successor abdicated to revolutionary forces that eventually established the Communist government in China. Many of the royal dogs were slaughtered during the stormy months that followed.