Many people believe that Boudhanath was constructed in the fifth century, but definite proof is lacking. It was almost certainly built during the Licchavi period (300-879 AD), in an isolated location or in a town that later crumbled away. An archive credits Manadev I (ruled 464-505) while Gopalaraja Vamsali, chronicle of Gopala Kings compiled by the fourteenth century, credits Sivadeva I (ruled 590-604) for erecting the original Bodhanath Stupa. Whereas, the Tibetans who settled around the area believe that the stupa is of Tibetan foundation. The most probable explanation will be that the stupa was originally built by Manadev I, then a shell, entirely covering the dome, was laid by his successor, Sivadev I, and then another layer was added to the dome when the Tibetans arrived in Kathmandu through the trade route. This explanation suits the traditional construction of a stupa as successive layers are added by donors to make the stupa dome bigger and stronger. A legend has it that a woman requested a Valley king for a donation of ground required to build a stupa. She said she needed land covered by one buffalo's skin. The king consented to give it to her. She cut a buffalo skin into thin strips and circled off a fairly large clearing. The king had no choice but to give her the land. This spot is also said to be how and where the Boudhanath came to be built.

The stupa stands on a three platforms, one on top of the other. Each platform is known as Vimsatikona, the platform of twenty angles. These platforms form a mandala structure with the stupa as the center. The huge, white dome of the Boudha is known as the anda, the egg, or garbha, womb, which represents the creation of the Earth. Each stupa, even the small ones skirting a larger stupa, is said to contain the ashes of a saint or to commemorate them. Boudha stupa is said to entomb the remains of the sage Kasyap who is venerable both to Buddhists and Hindus. Also believed to be within the dome are the five Dhyani Buddhas, or Tathagatas. There are eighty small recesses at the base of the dome with a Buddha sculpture in each. Above the dome is the four sided harmika, and each face has a painted pair of eyes looking in one of the four directions. The fashion of painting eyes on the harmika was started only in the fifteenth century. Some say that the set of eyes are that of Buddha's below which lies the whole world while others say they represent the sun and the moon. Above these eyes is a small eye which may be interpreted as the third eye, signifying the power of the god. Between the eyes is a symbol like a question mark, which some interpret as a nose, but it is actually the Nepali number "one." Buddhists use this symbol to indicate that there is only way out of the earthly suffering, the path led by Buddha, and others simply think of it as unity. Rising above harmika is the central spire constituted of a thirteen tiered finial, which are plated with copper. The peculiarity about the finial of Boudha to that of other stupas around the Kathmandu Valley is that the finial has four sided plates forming a pyramid instead of circular disks. The finial serves to remind people that there are thirteen obstacles to enlightenment. Only after transcending these barriers can one reach the top to the parasol, or nirvana. The pinnacle of the Boudhanath Stupa is also known as bodhi which means perfect knowledge.

The whole area is rich of Tibetan culture and displays some of the finest forms of Tibetan art that can be seen in the Kathmandu Valley. Colorful thangkas, Tibetan jewelry, hand-woven carpets, masks, and khukuri knives are sold there in stalls. Smaller stupas are located at the base. Gompa monasteries, curios shops, and restaurants surround Bouddhanath, Nepal's largest Buddhist stupa. Although similar in design to its smaller counterpart, Swayambhu, Boudha has a rounded top to its dome whereas Swayambhu's is flat.