The Yellow Dragon Cave was where sacrifices and libations were offered to the Yellow Dragon during the Southern Song Dynasty. Later it was converted first into a Buddhist temple, and then a Taoist temple. Today it is an imitation ancient garden, whose limited space is put to unlimited use to conjure up a site of unique natural beauty.

Yellow Dragon Cave is dressed in green with various kinds of bamboo. On a green steep rock, there is a spring flowing from the mouth of the yellow dragon and dropping into the pool below. It is one of the 'New Ten Sights of the West Lake'.