Mugai Ryu was created in the mid-17th century by Tsuji Gettan Sukemochi. Tsuji Gettan was born in 1649 in Shiga Ken Kohga Gun, Ama Umasugi. He moved to Edo (Tokyo) when he was 13, and began training in Yamaguchi Ryu Kenjutsu under Yamaguchi Bokushinsai and Jikyo Ryu with Taga Jikyo Morimasa. After having earned his teaching license, he opened his first kenjutsu dojo in 1675.

Around the same time, he began studying Zen Buddhism under the guidance of Sekitan Zenshi at Kyukoji. In 1694, he was given a set of principles or beliefs from his teacher, Sekitan Zenshi, and due to his demeanor and personality, was given the name "Mugai", which means "nothing on the outside". It was through his study of swordsmanship and Zen principles that he found his purpose, and created a style of swordsmanship called "Mugai Shinden Mugai Ryu Iaihyodo".

Today, Mugai Shinden Mugai Ryu Iaihyodo (or commonly known as Mugai Ryu) is one of the five styles that comprise the Nippon Iaido Renmei (Japan Iaido Federation) and is practiced worldwide.