It is thought that the monastery was founded in the 11th century as a cloister of the Vatopedi monastery on Mount Athos. In 1360, when Tarnovo was the capital of the Second Bulgarian Empire and the traditions of hesychasm were popular in Bulgaria, it became an autonomous monastery on the order of Tsar Ivan Alexander of Bulgaria. This is legendarily tied to the charity of Ivan Alexander's second wife Sarah-Theodora and their son Ivan Shishman, a reason to also call the monastery Sarah's or Shishman's monastery.