As the summer capital of the Yuan dynasty, Xanadu was closely associated with many world-influencing events in East-West exchanges and religious development during the 13-14th centuries. One of them is the great debate between Buddhism and Taoism. In the Yuan dynasty, four debates between Buddhism and Taoism took place. Hosting the 1258 debate in the Kaiping Prefecture (Xanadu) was entrusted to Kublai by Möngke Khan.

In the debate, the eloquent Tibetan Buddhist Phags-pa argued the Taoists down, and eventually the Buddhists won. Phags-pa was appointed State Preceptor after Kublai ascended the throne, ushering in the era when the Sakya school of Tibetan Buddhism dominated Tibet and even China as a whole.