Several locations in the Buddhist Himalaya between northern India and Tibet have claimed to be the basis for Hilton's legend, largely to attract tourism. In China, Tao Qian of the Jin Dynasty described a Shangri-La in his work Story of the Peach Blossom Valley (Chinese: 桃花源, pinyin: Táohuā Yuán Jì). In modern China, the Zhongdian country was renamed to 香格里拉县 (Xiānggélǐlā, Shanri-La in Chinese) in 2001, to attract tourists. The legendary Kun Lun Mountains in Tibet offer other possible Shangri-La valleys.
A popularly believed inspiration for Shangri-La is the Hunza Valley in northern Pakistan, close to the Tibetan border, which Hilton visited a few years before Lost Horizon was published. Being an isolated green valley surrounded by mountains, enclosed on the western end of the Himalayas, it closely matches the description in the novel. A Shangri-La resort in the nearby Skardu valley is a popular tourist attraction.
Today, various places claim the title, such as parts of southern Kham in southwestern Yunnan province, including the tourist destinations of Lijiang and Zhongdian. Places like Sichuan and Tibet also claim the real Shangri-La was in its territory. In 2001, Tibet Autonomous Region put forward a proposal that the three regions optimise all Shangri-la tourism resources and promote them as one. After failed attempts to establish a China Shangri-la Ecological Tourism Zone in 2002 and 2003, government representatives of Sichuan and Yunnan provinces and Tibet Autonomous Region signed a declaration of cooperation in 2004. Also in 2001, Zhongdian County in northwestern Yunnan officially renamed itself Shangri-La County.
Bhutan, which was until now isolated from outside world and has its unique form of Tibetan Buddhism, has been hailed as the last Shangri-La.
Another place that has been thought to have inspired the concept of Shangri-La is the Yarlung Tsangpo Canyon.
There are a number of modern Shangri-La pseudo-legends that have developed since 1933 in the wake of the novel and the film made from it. The Nazis had an enthusiasm for Shangri-La, where they hoped to find an ancient master race, similar to the Nordic race, unspoiled by Buddhism. They sent one expedition to Tibet, led by Ernst Schäfer in 1938.
Another pseudo-legend involves the Ojai Valley as the location for the 1937 Frank Capra film Lost Horizon. The outdoor scenes of the villagers of Shangri-La and a cavorting Ronald Colman and Jane Wyatt were in fact filmed in nearby Sherwood Forest (Westlake Village) and Palm Springs. The exterior of the grand lamasery was built and later dismantled on the Columbia Ranch in Burbank, California. However, according to film historian Kendall Miller in the photodocumentary bonus feature on the "Lost Horizon" DVD, an aerial shot of Ojai Valley taken from an outlook on Highway 150 was used to represent the Shangri-La valley.
United States President Franklin Delano Roosevelt, being considerably fond of Hilton's novel, named the presidential retreat now known as Camp David "Shangri-La" in 1942. In that April, United States bombers secretly launched from the aircraft carrier Hornet bombed Tokyo in a daring raid led by Colonel "Jimmy" Doolittle. Since Tokyo was far out of range of any American bomber base at the time, there was intense speculation as to where the bombers had come from. President Roosevelt facetiously told a press conference that the bombers had flown from Shangri-La. In line with this pleasantry, one of the aircraft carriers used in the Pacific ocean was subsequently named USS Shangri-La.
In 1937, Lutcher Stark, a prominent Texas philanthropist, started building his own Shangri-La in Orange, Texas. His Shangri-La was a beautiful azalea garden situated along a cypress/tupelo swamp. By 1950, thousands of people were traveling to Orange to visit Shangri La. Every major magazine dealing with gardens published photographs of the beautiful Shangri La in Texas. In 1958, a major snowstorm struck east Texas, destroying thousands of azaleas and closing the garden for forty years.
Politically and geographically, the independent and previously-independent nations isolated from the West, such as Tibet, Nepal, Bhutan, Sikkim, Tuva, Mongolia, the Tocharian Tushara Kingdom of the Mahābhārata and the Han Dynasty outpost Dunhuang have each been termed Shangri-Las.