He has become incorporated into Buddhist, Taoist and Shinto culture and is based on an eccentric Chinese Zen (Chán) monk who lived in the time of the Liang Dynasty. His image graces many temples, restaurants, amulets, and businesses. Budai has become a deity of contentment and abundance, when adopted by religious Taoists and Buddhists. In Japan, Hotei persists in folklore as one of the Seven Lucky Gods (Shichi Fukujin). He is almost always shown smiling or laughing, hence his nickname in Chinese, the "Laughing Buddha" ().
Budai derives from the time of Sakyamuni Buddha, where there was a monk named Angida, whose name also meant calico bag. Angida was one of the original eighteen Arhats of Buddhism. According to legend, Angida was a talented Indian snake catcher whose aim was to catch venomous snakes to prevent them from biting passers-by. Angida would also remove the snake's venomous fangs and release them. Due to his kindness, he was able to attain bodhi. Both Budai and Angida have similar resemblances, as they both are rotund, seen laughing and carrying a bag, However, in Chinese art, Angida is portrayed as Budai, so it may be unclear whether the imagery between the two are similar in any way.
Budai is almost always represented as carrying a cloth or linen sack, which never empties, and is filled with many precious items, including rice plants (indicating wealth), sweets for children, food, small mammals, and the woes of the world. Sometimes it can be filled with children, as they are seen as some of those precious items of this world. His duty is patron of the weak, the poor and children. In some Japanese representations, Budai may be found sitting on a cart drawn by boys, or wielding a fan called an ōgi (said to be a "wish giving" fan -- in the distant past, this type of fan was used by the aristocracy to indicate to vassals that their requests would be granted).
In Chinese Buddhist temples of the Chán sect, Budai's statue is traditionally placed in the front part of the entrance hall. He is depicted in the familiar likeness of the above described Laughing Buddha; a stout, smiling or laughing shaved man in robes with a largely exposed pot belly stomach symbolic for happiness, good luck, and plenitude.
Some sculptures have small children at his feet. Another item that is usually seen with the Budai figure, is a begging bowl; to represent his Buddhist nature. All of these images display Budai as a wandering monk who goes around and takes the sadness from people of this world. Because he represents prosperity and happiness, statuettes are often found in homes and businesses in China and Japan.
The primary story that concerns Budai in Zen (Chán) is a short kōan. In it, Budai is said to travel giving candy to poor children, only asking a penny from Zen monks or lay practitioners he meets. One day a monk walks up to him and asks, "What is the meaning of Zen?" Budai drops his bag. "How does one realize Zen?" he continued. Budai then took up his bag and continued on his way.
One tale relates that he was so handsome that once even a man wanted him for a wife. To avoid a similar situation, Phra Sangkadchai decided to transform himself into a fat monk. Another tale says he was so attractive that angels and men often compared him with the Buddha. He considered this inappropriate, so disguised himself in an unpleasantly fat body.
Although both Budai and Phra Sangkadchai may be found in both Thai and Chinese temples, Phra Sangkadchai is found more often in Thai temples, and Budai in Chinese temples. Two points to distinguish them from one another are:
1. Phra Sangkadchai has a trace of hair on his head (looking similar to the Buddha's) while Budai is clearly bald.
2. Phra Sangkadchai wears the robes in Theravadin Buddhist fashion with the robes folded across one shoulder, leaving the other uncovered. Budai wears the robes in Chinese style, covering both arms but leaving the front part of the upper body uncovered.
Budai in folklore is admired for his happiness, plenitude, and wisdom of contentment. One belief, popular in folklore not Buddhist doctrine, maintains that rubbing his belly brings forth wealth, good luck, and prosperity.