Bhutan was the second country to recognize the new Republic of Bangladesh in 1971. However, bilateral relations between Bangladesh and Bhutan only began in 1973 with the establisment of non-resident diplomatic relations. On January 8, 1980 Resident diplomatic relations were established. Bangladesh is the only other country, apart from India, which has an embassy in Bhutan.

In 1984, during a state visit of the King to Bangladesh, the two countries signed a protocol on the expansion and regulation of trade, and an agreement on economic and cultural cooperation. The Kingdom of Bhutan and Bangladesh have shared growing trade relations over the years. Apart from India and Nepal, Bangladesh is one os Bhutan's trading partners from amongst the SAARC countries.