About 75% of the Bhutanese practice Buddhism and about 25% practice Indian- and Nepalese-influenced Hinduism. While the law provides for religious freedom, the Drukpa sect of the Kagyupa School, a branch of Mahayana Buddhism, is the state religion, and the law prohibits religious conversions. The Drukpa (people of the dragon) subsect of the Kagyupa sect of Buddhism, introduced from Tibet in the 12th century, dominates the collective life of the Bhutanese through a large clerical body estimated at more than 6,000 lamas or monks, centered in 8 major monasteries (dzongs) and 200 smaller shrines (gompas) scattered throughout the land. This sect incorporates both the ideology of the classical Buddhist scriptures and the indigenous pre-Buddhist animistic beliefs called Bon. Nigmapa school of Mahayana Buddhism is also practiced, primarily in the eastern regions.

Among Hindus, the Shaivite, Vaishnavite, Shakta, Ghanapath, Paurinic, and Vedic schools are all represented. There are still a few Bon priests and followers in the country and there are small numbers of Christians.