The Northern Celestial Masters are an evolution of the Daoist Way of the Celestial Master in the north of China during the Southern and Northern Dynasties. The Northern Celestial Masters were a continuation of the Way as it had been practiced in Sichuan province by Zhang Lu and his followers. After the community was forced to relocate in 215 CE, a group of Celestial Masters established themselves in Northern China. Kou Qianzhi, from a family who followed the Celestial Master, brought a new version of Celestial Master Daoism to the Northern Wei. The Northern Wei government embraced his form of Daoism and established it as the state religion, thereby creating a new Daoist theocracy that lasted until 450 CE. The arrival of Buddhism had great influence on the Northern Celestial Masters, bringing monasticism and influencing the diet of practitioners. Art produced in areas dominated by the Northern Celestial Masters also began to show Buddhist influence. When the theocracy collapsed, many Daoists fled to Louguan, which quickly became an important religious center. The Northern Celestial Masters survived as a distinct school at Louguan until the late 7th century CE, when they became integrated into the wider Daoist movement.

Taoism or Daoism is a diverse tradition indigenous to China, variously characterized as both a philosophy and a religion. Taoism emphasizes living in harmony with the Tao—generally understood as being the impersonal, enigmatic process of transformation ultimately underlying reality. The concept originates in the Chinese word 道, which has numerous related meanings: possible English translations include 'way', 'road', and 'technique'. Taoist thought has informed the development of various practices within the Taoist tradition and beyond, including forms of meditation, astrology, qigong, feng shui, and internal alchemy. A common goal of Taoist practice is self-cultivation resulting in a deeper appreciation of the Tao, and thus a more harmonious existence. There are different formulations of Taoist ethics, but there is generally emphasis on virtues such as effortless action, naturalness or spontaneity, simplicity, and the three treasures of compassion, frugality, and humility. Many Taoist terms lack simple definitions and have been translated in several different ways.