Until the mid-nineties, the history of Reiki was based on a story told by Hawayo Takata and it was also believed that Reiki had died in Japan. In the nineties, a few Reiki Masters visited Japan with the intention of re-introducing the therapy to its native country; they found that Reiki had never died in Japan and that the true history of Reiki bore little resemblance to the Takata story. Takata's history is now described as the 'traditional history' of Reiki and is given below.

Traditional History

One day, during the late nineteenth century, some students at a Christian Seminary in Japan asked their principal, Mikao Usui, why they had heard nothing of the healing methods used by Jesus Christ and whether he could give them information on these methods or carry out such healing methods on them.  Since he was unable to carry out the healing or even answer their questions, Mikao Usui resigned his position and decided to study Christianity in a Christian country until he had the answers.  His journey led him to America, where he studied theology at the University of Chicago and eventually became a Doctor of Theology.  However, he still had not found the answers to his problem and so he decided to study Chinese writings but was not successful there either.  He also travelled to India where he was able to study the Sacred Writings but he still did not find the required answers.  Years later, after he had returned to Japan, he discovered some Sanskrit formulae and symbols in old Buddhist sutras.  At the time, he was living in a monastery in Kyoto and after discussion with the Head, he decided to carry out a 21-day fast on the holy mountain of Kuriyama in the hope of gaining contact with the level of consciousness the Sanskrit symbols had been written on, in order to determine the truth of their contents.

On arrival at the mountain he placed twenty-one small stones in front of him and removed one at the end of each day to keep track of time. During this time he read and meditated on the sutras but nothing unusual happened until the dawn of the last day.  It was still quite dark when he saw a shining bright light moving towards him at great speed which grew in size as it approached and finally hit him in the centre of the forehead.  Dr Usui thought he was going to die when suddenly he saw millions of little bubbles in all the colours of the rainbow; a great white light appeared and he saw the Sanskrit symbols glowing in shining gold and said "Yes, I remember".  The sun was high in the sky before he returned to a normal state of consciousness and he felt full of strength and energy and began to climb down the mountain.  However, he was in such a rush that he stubbed his toe; he held it in his hand for a few minutes and the bleeding stopped and the pain disappeared.  He stopped at an inn for a large Japanese breakfast but the inn-keeper warned not to eat such a large meal immediately after fasting - however, he was able to eat and enjoy the meal without problem.  He also managed to cure the innkeeper's grand-daughter of a severe toothache by placing his hands on her swollen face - she ran to her grandfather and told him that their guest was no ordinary monk.

Dr Usui spent the next seven years in the slums of Kyoto treating many illnesses and helping beggars to lead a better life.  One day he noticed that the same old faces kept returning and when he questioned them about it was told that work was too troublesome and that it was better to go on begging.  Dr Usui was deeply shaken by this and realised that he forgotten something of importance in healing; he had forgotten to teach gratitude.  They did not value what they had been given.  In the following days he developed some principles for Reiki and these principles are the cornerstone of Reiki; they are:

Just for today do not worry.
Just for today do not anger.
Honour your parents, teachers and elders.
Earn your living honestly.
Show gratitude to everything.

Before his death in 1926, Dr Usui passed the keys of Reiki to his closest associate, Dr Chujiro Hayashi.  Dr Hayashi ran a private Reiki clinic in Tokyo until 1940 and made several changes to the Usui system: he changed Usui's 6-position treatment to a 12-position treatment and invented a system of payment for teaching Reiki; and divided the training into 3 levels or degrees.  After Hayashi's death in 1941, his successor, Hawayo Takata, continued the work and it was Takata who brought Reiki to the west and also told the story of how Reiki was discovered.  Takata lived and healed in Hawaii for many years but did not start to train other Reiki Masters until after she had moved to California in 1970.  Before her demise in 1980, Takata trained twenty-two Reiki Masters in the USA and Canada.  Now, there are literally thousands of Reiki Masters all over the world who follow a line of succession of Masters from Dr Usui and Reiki is available almost anywhere in the world.

A More Factual History

Although the 'traditional history' makes a nice story, there is little in it that is true.  There is no evidence to suggest that Mikao Usui was ever a Christian; nor that he was the principal of Christian Seminary in Japan nor that he was a Doctor of Theology or of any other profession.  For more than two hundred years, from 1641 to the early 1850's, all foreigners with the exception of Dutch traders were banned from the country; Christianity was declared illegal; all Japanese were required to register at Shinto temples; those Japanese who refused to renounce Christianity were executed as were a few Christian missionaries who refused to leave the country.  The ban on Christianity was not lifted till 1873.  Also, Usui's closest friend and colleague was Toshiro Eguchi, not Hayashi; so, if Usui was passing on the keys to Reiki to anyone, it would NOT have been to Chujiro Hayashi.

Bearing these things in mind, it is unlikely that there would even have been many Christians in Japan in the late 1800s, even more unlikely that there would have been a Christian Seminary and very, very unlikely that a Japanese person would have been the Principal of one.  Also, there is no record of Usui claiming to be a Christian and, in his own writings, he was extremely skeptical of Christianity.  The University of Chicago has no record of anyone named Usui ever attending the University nor is there any record of Usui claiming to have attended; none of his contemporaries nor his students knew anything about this.  Likewise, there is no record of him travelling outside Japan and he made no mention of it.

What is much more likely is that Takata invented a history for Mikao Usui, presumably to give him more credibility and make his therapy more acceptable in the west.  Takata trained under Chujiro Hayashi.  Hayashi was a naval officer and would have travelled widely as part of his naval duties; he is also believed to have been a Christian.  It is possible that Takata transposed some of Hayashi's life story to Usui; the rest is either complete invention or a composite from various other people she might have known. Facts that we do know about Mikao Usui and Reiki are:

He was born on August 15, 1865 in the village of Taniai in the Yamagata district of Gifu prefecture which is located near Nagoya; he had a sister and two brothers.
His parents were Tendai Buddhists — Tendai Buddhism was introduced in to Japan by a Chinese monk in the 8th century.  Within Tendai, there is a mystic tradition, or discipline, known as Mikkyo (secret teachings).  Students, usually only Buddhist nuns and monks, as well as learning the teachings and techniques of Mikkyo must also be initiated into Mikkyo.  The initiation process is called 'Kanjo' and is transmitted from Master to Student in the form of an empowerment.
As a child, Usui attended a Tendai Buddhist Monastery school thus his spiritual foundations came from Tendai Buddhism.  In adult life, he was, for a time a Tendai Buddhist monk thus it is likely that he studied/practiced and was initiated into Mikkyo.  This may have been the foundation for later initiating students into Reiki — empowerments and attunements passed from Master to Student.
He is known to have trained in Kiko (a Japanese version Qigong) and in a martial art called Yagyu Ryu (Samurai swordsmanship) where, by his twenties, he had attained the highest level of proficiency in this discipline; he was known for his expertise in the martial arts and was an associate of Morihei Ueshiba (founder of Aikido).
As an adult, Mikao Usui was married; his wife's name was Sadako Suzuki and they had a son and daughter.
For a time, Usui had his own business but this seems to have failed about 1914; it is not known what the business was or the reason for its failure.  Apart from his business he was also employed at various times as public servant, office worker, industrial reporter and supervisor of convicts.  He is also reported as being 'private secretary' to Shimpe Goto (Secretary of the Interior and Postmaster General) – please note that 'private secretary' is a euphemism for bodyguard.  He is known to have been a voracious reader and was well read on a number of subjects, and doctrines, including medicine, psychology, spiritual development, Shintoism, Taoism and Christianity.
He did not found the Usui Reiki Ryoho Gakkai; it was founded after his death as a sort of memorial society; its first real president was Mr Ushida.  Although Usui is now called the first president of the Gakkai, that is an honorary position as he had, off course, died before it was founded.
He developed REIKI.
There is no evidence of Reiki being a re-discovered healing system that originated in Tibet; Usui never mentioned Tibetan origins nor a missing 'Sutra' nor is there any evidence that any Indo-Tibetan material was incorporated into the system.  There is however good evidence of it being based on techniques from Tendai Buddhism, Shinto, Shugendo and Taoism.  Usui did state, in the manual he gave to his students that:

"My Usui Reiki Ryoho is an original, it's nothing like this in the world. So I would like to release this method to the public for everyone's benefit and hope for everyone's happiness. My Reiki Ryoho is an original based on intuitive power in the universe. By this power, body gets healthy and enhances happiness of life and peaceful mind." He went on to state "I've never been given this method by anybody or studied to get psychic power to heal. I accidentally realized that I have received healing power when I felt the air in mysterious way during fasting. So I have a hard time explaining exactly even I am the founder. Scholars and men of intelligence have been studying this phenomenon but modern science can't solve it. But I believe that day will come naturally."

Please note that stories about Reiki originating in Tibet did not start till about the mid-eighties and appear to have originated with Arthur Robertson; Robertson had been attuned as a Master by Iris Ishikuro (one of Takata's masters) and developed a style of Reiki called 'Raku Kei Reiki' which incorporated Tibetan practices.

What has just been described are what are known to be true.  What follows below is not untrue; however, the dates and order of events are uncertain, some assumptions are made, there is a degree of speculation and there are gaps.

In 1868, when Usui was three years old, the Emperor Mutsuhito declared new beginnings in Japanese history (the Meiji Restoration) and renamed himself the Meiji Emperor.  Basically, over a period of 40 years, Japan was transformed from a feudal society into a modern industrial society; this was a period of huge turmoil with the Japanese people trying to adapt to an industrial world whilst at the same time trying to hang on to their ancient culture and spiritual traditions.  It was a period of much spiritual searching and new ideas.  Usui grew up during this period and was exposed to all of this.
Usui is known to have associated with some very spiritual people: Morihei Ueshiba (founder of Aikido), Onasiburo Deguchi (founder of Omoto religion), Mokichi Okada (founder of Johrei) and Toshiro Eguchi - Eguchi was the founder of a religion called 'Tenohira-Ryouchi-Kenyuka' which was really Shinto revivalism (i.e. getting back to Shamanic roots).  Eguchi is described as Usui's best friend and also as his most senior student; however, some sources say that Eguchi only trained in Reiki to please his friend.  The Usui Principles are a re-wording of a set of Principles from a sect which was a Tendai variation on Shugendo; they can be traced back to the 9th century.
Shinto is the indigenous religion of Japan; it is very like the belief systems of other indigenous cultures (e.g. Native Americans).  A Shinto priest has more in common with a Shaman or Native American medicine man than what is normally recognised as a priest; Shinto is more like 'being at one with nature' rather than a religion.  It is a mixture of nature worship, divination, shamanism and worship of Kami; Kami are a mixture of nature spirits, spirits of the deceased and also creation forces.
Shugendo (aka Mountain Buddhism) is a discipline used for developing spiritual powers; it combines elements of Shinto, Shamanism and Buddhism.  Shugendo followers spend years isolated in the mountains developing magico-spiritual healing powers; it is a deeply ascetic practice.
We are all products of our environment, upbringing and the company we keep; Usui was no exception.  Reiki is a modern therapy but it is based on ancient practices and healing rituals from Tendai Buddhism, Shinto and Shugendo; these were his roots.  It would probably be more accurate to look on it as a mixture of ancient therapies that have been revived and compressed into one.
The traditional story tells us that he received the gift of 'healing' during a moment of enlightenment while doing a 21-day fast. However, it is now known that he did at least five of these fasts and according to one Japanese source, he was teaching Reiki before doing any of them. He was a very spiritual man and probably fasted quite often and it is possible that he did the longer fasts as a way of trying to understand what was happening.
Initially, the Usui healing system did not have a name; his students referred to it as 'Usui Do' (the Usui Method) or 'Usui Teate' (Usui Hand-Healing). The word 'Reiki' came later.  Reiki, as developed by Usui, was a 'Ronin' (masterless) system that was available to all; he never saw himself as the 'Grand Master' and thus did not pass this on to anyone else; certainly not Chujiro Hayashi.  It was believed that Usui had founded a Reiki Society (the Gakkai) and that he was the first president of the Gakkai; we now know that this is not true, the Gakkai was founded after his death to teach Reiki and preserve the origins and traditions of Reiki as taught by Mikao Usui.
Usui is believed to have taught Reiki to over a thousand people; however, only 30 were taught to second-degree level and 17 to teacher level; these consisted of 5 Buddhist nuns, 3 Naval Officers and 9 other men. Those he taught to teacher level included his friend 'Eguchi' and Chujiro Hayashi.

After Usui's death, the Reiki story continues with Chujiro Hayashi.

Chujiro Hayashi was born in 1878, graduated from Naval School in 1902, trained as a Reiki teacher with Usui in 1925 (when he was 47 years old).  He was a Doctor in the Japanese Imperial Navy with the rank of Captain; he and two other Naval officers (Ushida and Taketomi) are believed to have been the last people trained to Teacher level by Usui.  Hayashi is believed to have been a Christian.  Together with the other two naval offices, Hayashi founded the Usui Ryoho Gakkai (Ushida was its first President) to preserve the teachings and traditions of Reiki as taught by Usui.  However, though he was one of the founding members of the Gakkai, he left.  Nobody knows, for sure, why he left but it is thought that he disagreed with changes that the other Imperial officers were introducing (e.g. adding elements from other practices such as Kiko) and also because some of the additions conflicted with his Christian beliefs.  Please note that though most of the factual information we have on Usui was obtained from the Gakkai, his other Master students thought of the Gakkai as an Officer's club and did not hold it in high esteem.  Also, Reiki as taught by the Gakkai appears to very different to what Usui taught.
We don't know exactly when Hayashi left the Gakkai but he opened his own clinic about 5 years after the death of Usui.  Hayashi kept detailed records of treatments and is believed to have used this information to create standard hand positions for different ailments. These ended up being published in his own manual which was more extensive than the Usui manual.  Please note, that in both cases, the manuals were no more than basic learning tools.  Hayashi's approach appears to have been based on the traditional medical model (i.e. you diagnose the ailment and then use a particular set of hand-positions to deal with it) and this would be in line with his own medical training; this was very different from the Usui approach which was much more intuitive.  Please note that the training, by Usui, of the naval officers was very compressed compared to the time taken with his other students and it is highly unlikely that he had time to teach them everything that he taught his other Master students; in particular, it is believed that the naval officers were not taught how to do Reiju empowerments.  However, Hayashi could do empowerments and, if not Usui, the only one who could and would have taught him would have been Eguchi; this would have happened after Usui's death.  It is known that Eguchi joined the Gakkai out of respect for Usui but left within a year because he did not agree with the directions they were taking.
Chujiro Hayashi died on May 10th 1940. He took his own life by committing Seppuku (ritual disembowelment); it seems that he was very concerned at the build up of nationalism in his country, and it was the threat of war that led to his death.  Dr Hayashi's wife Chie continued as President of his school, teaching in the 1940s, but their children did not continue the clinic.

The Reiki story then continues with Hawayo Takata

Hawayo Takata was born in 1900 on the island of Kauai, Hawaii.  She came to Dr Hayashi's clinic suffering from a number of serious medical conditions that were resolved through Reiki, but she was originally intending to receive conventional Western medical treatments for her tumour, gall stones and appendicitis.  The story goes, though, that on the operating table (just before the surgery was about to start) Mrs Takata heard a voice that said "The operation is not necessary".  She is said to have refused the operation, and asked her Doctor if he knew of any other way to restore her health.  The doctor referred her to Dr. Hayashi and she began receiving a course of treatments.  This sounds a bit improbable but, true or not, Takata was obviously impressed with Reiki and wanted to learn it.  Hayashi taught Takata to Master level; she was probably the last Master that he initiated.
Takata returned to the USA, and after the war, she began healing and teaching Reiki though it was not until 1970 that she started training Masters.  It would have been difficult for Takata to use/teach a Japanese Healing technique after the 2nd World War when Americans were not well disposed towards anything connected with Japan.  Nowadays, we are used to alternative therapies, Chinese medicine, chakras, chi, etc. but back then, these ideas would have been very alien to her prospective students.  This is probably the reason why she modified the Reiki teachings she had been taught by Hayashi (to make it more acceptable in the west) and why Reiki in the west is so different to that practiced in Japan (at least as far as initiation methods are concerned).  Probably for the same reason, she felt it necessary to convert Usui into a Christian and give him a completely new life history.
Between 1970 and 1980, Takata taught 22 Reiki Masters and up to the last 20 years, all Reiki practitioners in the western world could trace their Reiki lineage through Takata and Hayashi to Mikao Usui.  These original Masters passed on their tradition and Reiki has spread; today, it is impossible to estimate the numbers of Masters and practitioners but it must run into tens of thousands and millions, respectively.  So, whether she was right or wrong as regards changing Reiki and the history of its founder, she did successfully introduce Reiki to the west.  Unfortunately, Takata ended up being referred to as 'Grand Master' to distinguish her from other Masters; this was not a position Usui envisioned or would have approved of as he wanted Reiki to be a 'masterless' system.

Today, there are many variations of Reiki in the west but many Masters are now including Japanese empowerments in their teachings or have replaced Takata's attunements with Japanese Reiju empowerments.  So whilst Reiki is still expanding and developing, it is also returning to its Japanese roots.