According to tradition, it was founded in 1591 (Tensho 19) by Date Masamune — later founder of Sendai Domain — to pray for the repose of his father Terumune, making it one of Sendai's preeminent ancient temples. Masamune's eldest daughter, Iroha-hime (1594–1661), who married Matsudaira Tadateru, the sixth son of Tokugawa Ieyasu, returned to Sendai Domain after her husband's forfeiture and exile, took Buddhist vows, and is said to have resided at this temple from around 1621 (Gen'na 7).

Tokugawa Ieyasu's sixth son, Matsudaira Tadateru, married Date Masamune's eldest daughter Iroha-hime, uniting the two great daimyo houses. Yet Tadateru was stripped of his domain and exiled shortly after Ieyasu's death in 1616, reportedly for misconduct during the Siege of Osaka. Iroha-hime returned to Sendai, took Buddhist vows, and spent her final years at Koshoji. Even after her marriage to Ieyasu's son ended in disgrace, the temple she maintained here preserves the tangled history between the Tokugawa and Date clans.