临济宗的开创者是义玄禅师（公元787-867），曹州南华人，出家后广研戒律与经论，继而到各处参学。后蒙黄檗希运禅师印可，遂于唐太宗八年（公元854），至镇州临济院广接徒众，门风峭峻，盛于一代。
在黄檗门下时，义玄曾问希运禅师「如何是佛法大意？」这一问便被禅师举棒即打，义玄被打得莫名其妙，自问︰「何错之有？」后来经大愚禅师点醒，才恍然明白到，当头棒喝可截断学人的妄念，令其于猛然之间不假思索，直见佛性。
创立了临济宗之后，义玄继承道一、希运「触类是道」的思想，进而提出「立处即真」的主张，强调任运自在、随缘而行，故而採用种种方便接引徒众，更以机锋峭峻著称于世。义玄接化学人，每以叱喝显大机用，故而有「临济喝、德山棒」之称，这种棒喝宗风，日后亦成为了中国禅宗极具代表性的教法。
传至石霜楚圆（公元986-1039）门下，临济宗又分出了黄龙与杨岐二派，两者先后于公元十二、三世纪被引进了日本，在那裡得到极大的发展。
Chan Master Yi Xuan （AD 787-867） was the founder of the Linji school of Chan Buddhism. He was born in Nanhua District in Caozhou. After he became a monk, he first studied vinaya and scriptures, and then travelled widely to learn from various teachers. After he was verified for his awakening state by Chan Master Huangbo Xiyun, Master Yi Xuan, in the eighth year of Emperor Tang Taizong （AD 854）， came to Linji Temple in Zhenzhou to preach and teach. His unique teaching style made this Chan school shine through the history.
When Yi Xuan was trained under Chan Master Huangbo Xiyun, he asked what in brief is Buddha-Dharma? Unexpectedly, the master hit him with a stick. Very confounded, Yi Xuan asked himself, What did I do wrong? Later on, Chan Master Da Yu made him realized that sudden hit could cut off the deluded thoughts, allowing the Buddha nature to manifest.
After the founding of the Linji school, Yi Xuan inherited Chan ideas of Chan Master Dao Yi and Xi Yun that All one does is the Way. Further, Master Yi Xuan proposed that Reality is where you are now. He emphasized to act spontaneously and to go with karmic flow. His teaching flexibly adopted various means and became well known for abrupt but profound dialogues, in which he engaged the people to awake them suddenly. Shouting is one of the means he frequently used that proved very effective. Hence, the saying of Linji shout and Deshan stick came to being. This shouting style has become an iconic pedagogy of Chinese Chan school.
As the lineage reached Shishuang Chuyuan （AD 986-1039）， the Linji school was again divided into two sub-sects of Huanglong and Yangqi. Both were introduced to Japan in the twelfth and the thirteenth century and flourished there.
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