The underground palace lies about 2.6 meters below the foundation of Leifeng Pagoda. A stone tablet covering the entrance of the underground palace was exposed after a huge stone weighing more than 750 kg was lifted away.

　　Once the tablet was removed, the shaft-like underground palace was revealed. A Buddhist statue, several bronze mirrors, dozens of coins, a rusty iron case believed to contain Buddhist relics and other items of historical and cultural value were found at the initial uncovering of the palace.

　　"According to an inscription on a stone tablet uncovered early this year, the iron case in the underground palace contains the hair of Sakyamuni, the founder of Buddhism," said Cao Jinyan, director of the Cultural Relics Archaeological Study Institute of Zhejiang Province.

　　The excavation of the underground palace was conducted by an archaeological team under the institute.

　　Leifeng Pagoda was first completed in AD 976 during the early Northern Song Dynasty (960-1127). During the Qing Dynasty (1644-1911), Leifeng Pagoda was left to deteriorate.

　　Local people then began to take bricks from the pagoda as it was believed they would bring luck and great fortune to those who owned a piece of the pagoda. However, they hardly reached the underground palace.

　　After centuries of neglect, the pagoda collapsed on September 25, 1924. Hangzhou municipal government decided to restore the pagoda in October 1999 following decades of debate about the future of the site.

　　A restoration plan proposed by Guo Daiheng, an architect from Tsinghua University, was approved.