The practice of seeking visions on the surface of Lhamo Latso to help identify the reincarnation of a deceased Dalai Lama has specific, well documented historical instances, among the most often cited being the search that led to the recognition of the fourteenth Dalai Lama, Tenzin Gyatso, in the 1930s. Following the death of the thirteenth Dalai Lama in 1933, the regent overseeing the search, Reting Rinpoche, is recorded by Tibetan historical accounts and by the Dalai Lama's own later writings as having traveled to Lhamo Latso and observed visions on the lake's surface that were interpreted as indicating specific Tibetan letters and images pointing toward a monastery and a general region, understood afterward to correspond to Kumbum monastery and the wider Amdo region in what is now Qinghai province in China, guiding the search party that eventually identified and tested the young child who would become the fourteenth Dalai Lama. This episode is frequently retold, including in the Dalai Lama's own autobiographical accounts, as a central and formative part of the modern narrative of his own recognition, giving Palden Lhamo's oracular lake a documented and historically specific role in one of the most consequential religious-political successions of twentieth century Tibet.
The practice continues to be regarded within the tradition as a legitimate and important, though not exclusive, method for guiding the search for high reincarnate teachers generally, used alongside dreams, astrological calculation and other divinatory methods, and Lhamo Latso's association with Palden Lhamo gives this specific body of water a continuing religious and political significance well beyond its natural geographic features alone.