Kaguya was once the princess of the Lunarians, a race of people living on the Moon. She was exiled to Earth over a thousand years ago for the crime of using the forbidden Hourai Elixir to make herself immortal. Arriving on Earth in what is today central Japan, she was found by a bamboo cutter and dwelt among the humans she had once despised. Though the Lunarians looked upon humans with contempt, Kaguya came to love her new home. Her unearthly beauty led men from all across Japan to seek her hand in marriage, but none could successfully complete her trial of the Five Impossible Requests.

After years of exile, emissaries arrived from the Moon; Kaguya had been forgiven of her crime and it had been decided that she should return. Kaguya, however, had grown to love life on Earth and had no desire to return to the lunar capital. Enlisting the help of her friend Eirin, Kaguya escaped from the emissaries and fled to Gensoukyou. Taking refuge in an ancient mansion called Eientei hidden deep within a secluded bamboo forest, the two Lunarians began a new exile.

During the events of Imperishable Night, Kaguya had been hidden in a secret pathway along with the true moon by Eirin to ensure any Lunarians sent to recover Reisen would not discover her. The heroines, however, did discover her, and challenged her to return the full moon to Gensoukyou. After being defeated, Kaguya unleashed her power of eternity in an all-out bid to break the spell of the imperishable night cast by the heroines. Finally she relented and the true moon was recovered.

She now spends her days living in Eientei in a carefree manner, sometimes holding exhibitions of Lunarian treasures there for the rest of Gensoukyou to admire. Her long isolation has made her lonely, and she enjoys telling stories to any guests she might receive.