Karma Pakshi (1204-1283), an eminent monk of the Karma Kagyu Sect, was back in Tsurphu Monastery, the main temple of Karma Kagyu in 1264 after he lost power in the contend for throne following the death of Emperor Xianzong of the Yuan Dynasty. Karma Pakshi passed away in 1283. Born in present-day Garze of Sichuan province, Karma Pakshi was regarded in his childhood as the reincarnation of Dusum Khyenpa (1110-1193), founder of the juvenile Kagyu Sect. Before Karma Pakshi passed away, he thought over the future development of the juvenile Kagyu Sect and came up with the idea to select religious successors by the means of reincarnation to ensure the continuation of the denomination. He appointed Ugyenpa Rinchen Pal (1230-1309) as abbot of Tsurphu Monastery, and assigned Ugyenpa Rinchen Pal to search for the reincarnation of Karma Pakshi. In 1288, Ugyenpa Rinchen Pal recognized Rangjung Dorje (1284-1339), a potter's son in present-day Gyirong County of Tibet as the reincarnated soul boy of Karma Pakshi through the measures of searching, investigation, having the young boy to recognize Karma Pakshi's remaining belongings etc. Thus, Rangjung Dorje became the first reincarnated Living Buddha in history of Tibetan Buddhism. The Karma Kagyu Sect regarded Dusum Khyenpa as the first and Karma Pakshi as the second and Rangjung Dorje as the third in this reincarnation system (refer to Illustration 83). As Emperor Xianzong of the Yuan Dynasty once gave a golden seal and a black hat with golden brim to Karma Pakshi, the black hat has become the symbol of Gyalwang Karmapa succession system (also known as black hat system) of the Karma Kagyu Sect. After being greeted into Tsurphu Monastery, Rangjung Dorje received Getsul at the age of seven and received Gelong vows at the age of eighteen and began his monk activities then. The practice then became the convention that all following Living Buddhas should comply.
From year 1333 to 1337, at the invitation of Emperor Wenzong (1304-1332) and Emperor Huizong (1320-1370) of the Yuan Dynasty, Rangjung Dorje visited Dadu (now Beijing) twice preaching for royal families. Emperor Huizong successively granted him the titles of "Enlightenment of Doctrine, Empty in Essence Buddha Karmapa" and "State Initiation Master", and gave him the jade seal, round-shaped commander's seal with golden characters, gold, silver and jewelry, and some monasteries. With the central government's conferment and reward, Living Buddhas of Karma Kagyu Sect had obtained both high political and religious status and substantial economic benefits, which laid a solid foundation for the prosperity of their Living Buddhas and development of the denomination.
Drakpa Sengge (1283-1349), a disciple of Rangjung Dorje, presiding over Tsurphu Monastery when Rangjung Dorje stayed in Beijing, was granted the title of State Initiation Master by Emperor Huizong due to his outstanding knowledge and religious practice in Buddhism and was given a red hat. In 1349, after Drakpa Sengge's passing away, the Karma Kagyu Sect investigated and confirmed Khakyod Wangpo (1305-1405) as the second Karmapa red hat system. Since then it has begun the reincarnation of Living Buddhas of the Shamarpa system (also called red hat system) of the denomination.
During the Yuan and Ming Dynasties, Living Buddhas of the Karma Kagyu Sect were all conferred by the central governments. They paid tribute to the imperial courts regularly and performed their duties. Rolpai Dorje (1340-1383), born in the present-day Banbar County of Tibet, being greeted into Tsurphu Monastery in 1352 and recognized as the fourth Karmapa, was accorded reception from Changchub Gyaltsen (1302-1364), Chief Minister of the Interior of the Phagdru local Tibetan government at that time. Ministers of Xuanzheng Yuan visiting Tibet paid him a visit as well. In 1360, at the invitation of Emperor Huizong of the Yuan Dynast, he went to Beijing and was granted the title of "Upholding Doctrine and Prospering Buddhism, Stage Master of Grand Yuan" and given crystal seals. He began to dispatch envoy and pay tribute to the Ming Dynasty annually from year 1374 on.