Known only by his nickname, which means "the old philosopher", Lao-tzu was curator of the imperial archives at Loyang in Ch'u province, China, sometime in the 6th Century BC. Like his contemporary, Confucius, Lao-tzu was disillusioned with the tyranny of China's rulers, but rather than attempt a reform, he threw his towel in on government altogether. Deciding that man was supposed to live a simple life, without a fruitless search for knowledge or enlightenment, Lao-tzu quit his job and went home.

However, such was his reputation as a sage that he could not escape his disciples, and so he decided to leave corrupt society behind altogether. At the border he was stopped by his friend Yin-hsi who convinced him to write down his teachings. Lao-tzu composed the Tao Te King over three days, before riding his water buffalo into the mythical K'un-lun mountains, never to be seen again.

Taoism (pronounced 'Dowism') reflects the path taken in nature by water, which unresistingly accepts the lowest level and yet wears away the hardest substance. This philosophical principle of non-effort encourages a laissez-faire attitude to life, totally in conflict with Confucius' social virtues. Lao-tzu's philosophy was expanded on by the satirical writings of Chuang-tzu (c.369-286BC).

Over the years Taoist philosophy appears to have blended with local polytheism, largely in response to the growth of Mahayana Buddhism in China. Offerings were being made at the temple to Lao-tzu by the 2nd Century AD, and religious Taoism was fully developed by the 5th Century AD, with a hierarchy of local deities. One story tells how, before he was born, Yu Huang's mother dreamt that Lao-tzu handed her a child: Yu Huang being the Jade Emperor, supreme ruler of heaven.