Starting in July 1955, access roads and worker facilities were constructed at the dam site, and the area of the future reservoir was prepared to accommodate flooding.
About 2,000 people (416 families) living in the Dahan River valley would be displaced by the project; they were relocated starting in 1956 to areas along Taiwan's northwest coast.
Although the government built new homes, schools and other infrastructure as well as providing land compensation to families, the resettlement programme was the subject of bitter controversy.

The dam was designed by Tippetts-Abbett-McCarthy-Stratton, with construction overseen by Morrison-Knudsen (known previously for its work on Hoover Dam).
Heavy construction began in late 1959 when large equipment arrived at the dam site.
Although work was interrupted several times by typhoon flooding, the river was successfully diverted into a tunnel in December 1960.
The concrete cofferdam, later to serve as the core of the dam, was finished in 1962; notably, it was the first use of roller-compacted concrete in dam construction.
About 120 hectares (300 acres) of nearby farmland were purchased by the government to provide 6,675,000 cubic metres (235,700,000 cu ft) of earth and rock needed to build the dam.

With the dam only partially complete in May 1963, the diversion tunnel was plugged, allowing the reservoir to begin storing water.
In July 1963, Typhoon Wendy struck Taiwan, causing massive flooding; the new reservoir was able to reduce the flood crest on the Dahan River by 25 percent.
The embankment was topped out in June 1964, at a final cost of NT$ 4.85 billion.
The dam was dedicated on June 14, 1964 by Vice President Chen Cheng, to a crowd of more than four thousand people.
 A total of 7,500 people were employed in the construction of the dam, with as many as 6,000 workers on the site at one time.
Thirty-two people were killed during construction; out of 2,881 injured, 87 were left permanently disabled.
Starting in July 1955, access roads and worker facilities were constructed at the dam site, and the area of the future reservoir was prepared to accommodate flooding. About 2,000 people (416 families) living in the Dahan River valley would be displaced by the project; they were relocated starting in 1956 to areas along Taiwan's northwest coast. Although the government built new homes, schools and other infrastructure as well as providing land compensation to families, the resettlement programme was the subject of bitter controversy.
The dam was designed by Tippetts-Abbett-McCarthy-Stratton, with construction overseen by Morrison-Knudsen (known previously for its work on Hoover Dam). Heavy construction began in late 1959 when large equipment arrived at the dam site. Although work was interrupted several times by typhoon flooding, the river was successfully diverted into a tunnel in December 1960. The concrete cofferdam, later to serve as the core of the dam, was finished in 1962; notably, it was the first use of roller-compacted concrete in dam construction. About 120 hectares (300 acres) of nearby farmland were purchased by the government to provide 6,675,000 cubic metres (235,700,000 cu ft) of earth and rock needed to build the dam.
With the dam only partially complete in May 1963, the diversion tunnel was plugged, allowing the reservoir to begin storing water. In July 1963, Typhoon Wendy struck Taiwan, causing massive flooding; the new reservoir was able to reduce the flood crest on the Dahan River by 25 percent. The embankment was topped out in June 1964, at a final cost of NT$ 4.85 billion. The dam was dedicated on June 14, 1964 by Vice President Chen Cheng, to a crowd of more than four thousand people.  A total of 7,500 people were employed in the construction of the dam, with as many as 6,000 workers on the site at one time. Thirty-two people were killed during construction; out of 2,881 injured, 87 were left permanently disabled.
Shihmen Dam