The novel is set in eighteenth-century Bhutan, and Kernaghan bases her story on Tibetan Buddhist legends of a journey to the mystical kingdom of Shambhala, beyond the furthest snow peaks.

This novel evolved partly from the author's interest in Tibetan Buddhism. Before she began writing Dance of the Snow Dragon, she had just finished a non-fiction book, Walking after Midnight, which involved research into eastern philosophies and an interview with the Dalai Lama. About that time, a friend and writing partner, Mary Choo, had been fascinated with the Royal Bhutanese Dance Troupe when they performed in Vancouver. Choo suggested that Kernaghan try Bhutan for the setting of a new fantasy, since Tibetan Buddhism has been preserved there in a very pure form.

Though Kernaghan knew absolutely nothing about Bhutan at the time, she went to the library. After reading everything she could find on Bhutan—history, geography...