In the history of Chinese Buddhist sculpture is a unique expression of the Bodhisattva Avalokiteśvara. Known as the “Acuoye Avalokiteśvara,” it was strongly influenced by Buddhist art of the ninth century from Indochina. The Acuoye Avalokiteśvara was specific to the Dali area, its belief system depicted and explained in detail in Illustrated Tales of the Nanzhao Kingdom and The Text to Illustrated Tales of the Nanzhao Kingdom. The first part of this study examines the dates of these two handscrolls, followed by a tracing of the development of this belief system. The author considers this belief to be quite ancient, going back to Fengyou’s reign (824-859) in the Nanzhao Kingdom. At the time, the country’s power was increasing and national consciousness becoming more noticeable. Therefore, in order to express the authority and legal dominion of the Nanzhao ruling clan, Fengyou created the notion that the Acuoye Avalokiteśvara was reincarnated as an Indian monk based on an early notion of Avalokiteśvara in the Chapter on the Universal Gateway. The monk then conveyed authority to the Meng clan, thus becoming part of the mythology behind the mandate of heaven for their rule. Each generation of the ruling Nanzhao clan thereafter, and including the Dali Kingdom, venerated the Acuoye Avalokiteśvara. This belief, which continued for centuries, led to the production of a large number of Acuoye Avalokiteśvara sculptures. Unfortunately, stylistic analysis indicates that most of these surviving sculptures date from the latter part of the Dali Kingdom in the twelfth and thirteenth centuries, with none as yet discovered from the Nanzhao Kingdom.