Also called Kuan Yin Temple, it sits at the junction of Lebuh China. Founded in 1801 on East India Company land by by the first Chinese settlers of the Hokkien and Cantonese communities, the temple looms over visitors with its prominent red roof, snarling dragons and lions. It bristles with endless activity all year round and the air is perpetually soaked with sandalwood incense, burnt joss sticks and smog from nearby traffic. On the Goddess of Mercy's feast days, which are on the 19th day of the 2nd, 6th and 9th month of the lunar calendar, there are puppet shows and authentic Chinese operas. And if you're lucky, you just might be able to catch the majestic dragon dance.

The temple also honours Ma Chor Poh, the patron saint of seafarers who was highly regarded by the Chinese settlers, many of whom had travelled great distances, crossing the seas from China to Penang. This well-known Taoist temple of Kuan Yin is believed to be the oldest temple in Penang.

The Kuan Yin Teng was sited on a gentle knoll, which is regarded as a dragon in feng shui, a geomantically strategic place to locate a temple. In keeping with ceh-sua-kua-hai or viewing-the-sea-from-a-hillside-perch position, the temple was to command a view of the sea all the way to the hills of Province Wellesley. There are two visible wells at the Kuan Yin Teng, one at the courtyard for public use, and one within the temple, for the monks. Though now disused, they are significant from feng shui aspect, for they are regarded as the "eyes of the dragon". According to belief, there is supposed to be a third well, right under the front altar, which act as the dragon's "third eye".