According to legend, the temple was founded in the year 605, during the 13th year of Empress Suiko's reign, when Prince Shōtoku visited the area. In one version of the founding story, a mermaid appeared to the prince in the reedy shallows of Kanzaki County. She told him she had once been a fisherman from Katata, a village on Lake Biwa's shore, but her repeated taking of life had condemned her to reincarnate as a sea creature wracked with suffering. She pleaded for a statue of Senjū Kannon to be enshrined in a temple so her soul could find peace. Prince Shōtoku obliged, carving the statue himself. Later accounts say the mermaid attained Buddhahood, and her body was retrieved from the water and placed in the temple. For centuries, Kannonshō-ji displayed what it claimed was the mermaid's mummy -- until fire consumed it in 1993.

Whatever its legendary origins, the temple certainly existed by the 11th century during the Heian period. By the Kamakura period, it sat at the heart of a volatile landscape. Mount Kinugasa also hosted Kannonji Castle, stronghold of the Rokkaku clan who governed southern Ōmi Province. In 1333, the temple found itself caught up in imperial drama when the Rokuhara Tandai official Hōjō Nakatoki, attacked by Ashikaga Takauji, attempted to flee eastward with Emperor Kōgon and two retired emperors, Go-Fushimi and Hanazono. The temple served as lodging for these fugitive royals during their desperate escape. The Rokkaku initially protected the temple, but during the Eiroku era of 1558 to 1570, the lord Rokkaku Yoshikata expanded Kannonji Castle so aggressively that he appropriated most of the temple grounds, forcing the monks to rebuild at the mountain's foot. That reconstruction had barely finished when Oda Nobunaga defeated the Rokkaku on September 12, 1568, and the new temple buildings burned in the battle.

Kannonshō-ji's history reads like a cycle of destruction and resurrection. After Kannonji Castle fell to ruin, the temple rebuilt on its original mountaintop location in 1597. A new main hall went up in 1606. During the Edo period, the temple flourished as a pilgrimage destination. In 1880, the main hall was rebuilt again, with the old structure dismantled and relocated to Nenshō-ji in nearby Kōra. Then in 1882, the temple acquired the Zelkova Palace, a structure from Hikone Castle, to serve as its new main hall. That building survived over a century -- until 1993, when fire struck again. The mountain location made firefighting nearly impossible. The blaze destroyed the hall, the temple's principal image -- a standing Senjū Kannon statue inscribed with the date 1497 and designated a National Important Cultural Property -- and the famous mermaid mummy. Centuries of irreplaceable history turned to ash in hours.

The current wooden main hall, built in the elegant irimoya hip-and-gable style, was completed in 2004. But the true labor of devotion was the new principal image. Buddhist sculptor Myōkei Matsumoto carved a seated Senjū Kannon statue standing 3.56 meters tall, with a total height of 6.3 meters including its halo. The statue is made from 23 tons of sandalwood imported from India -- a material that was officially prohibited for export. The temple's chief priest traveled to India more than 20 times, negotiating patiently over years until he secured special permission to export the sacred wood to Japan. Meanwhile, the original main image from before the fire -- which had somehow survived unscathed -- was designated a hibutsu, a secret Buddha, and opened to the public in 2022. It is scheduled to be revealed again only once every 33 years.