Meaning "the meadow of pearls", the area only developed as a residential area in the 1980s, following the initial establishment of the Motithang Hotel in 1974, on the occasion of the coronation of Jigme Singye Wangchuck.
In 1910, Sikkim Political Officer and Tibetologist Sir Charles Alfred Bell engaged Bhutan and signed the Treaty of Punakha and other agreements that had the effect of assigning land in Motithang (Thimphu) and a hill station between Chukha and Thimphu to the British, assigning a portion of Kalimpong to Bhutan, and doubling the per annum subsidy from Britain to Bhutan.