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Traditional accounts

The earliest biographical reference to Laozi is found in the 1st‑century BC Records of the Grand Historian by Sima Qian. Multiple accounts of Laozi's biography are presented, with Sima Qian expressing various levels of doubt in his sources.

In one account, Sima Qian reports that Laozi was said to be a contemporary of Confucius during the 6th or 5th century BC. His personal name was Er or Dan. He was born in the village of Quren (曲仁里, Qūrén lǐ) in the southern state of Chu, within present-day Luyi in Henan. He was said to be the son of the Censor-in-Chief of the Zhou dynasty and Lady Yishou (益壽氏), and was a scholar who worked as the Keeper of the Archives for the royal Zhou court. This reportedly allowed him broad access to the works of the Yellow Emperor and other classics of the time, and wrote a book in two parts before departing to the west.

In another, Laozi was a different contemporary of Confucius called Lao Laizi (老莱子), one of the Twenty-four Filial Exemplars, and wrote a book in 15 parts. The story tells of Zong the Warrior who defeats an enemy and triumphs, and then abandons the corpses of the enemy soldiers to be eaten by vultures. By coincidence Laozi, traveling and teaching the way of the Tao, comes on the scene and is revealed to be the father of Zong, from whom he was separated in childhood. Laozi tells his son that it is better to treat respectfully a beaten enemy, and that the disrespect to their dead would cause his foes to seek revenge. Convinced, Zong orders his soldiers to bury the enemy dead. Funeral mourning is held for the dead of both parties and a lasting peace is made.

In a third, he was the court astrologer Lao Dan who lived during the 4th century BC reign of the Duke Xian of Qin who grew weary of the moral decay of life in Chengzhou and noted the kingdom's decline. He ventured west to live as a hermit in the unsettled frontier at the age of 80. At the western gate of the city (or kingdom), he was recognized by the guard Yinxi. The sentry asked the old master to record his wisdom for the good of the country before he would be permitted to pass. The text Laozi wrote was said to be the Tao Te Ching, although the present version of the text includes additions from later periods. In some versions of the tale, the sentry was so touched by the work that he became a disciple and left with Laozi, never to be seen again. In some later interpretations, the "Old Master" journeyed all the way to India and was the teacher of Siddartha Gautama, the Buddha. Others say he was the Buddha himself.

The stories assert that Laozi never opened a formal school but nonetheless attracted a large number of students and loyal disciples. There are many variations of a story retelling his encounter with Confucius, most famously in the Zhuangzi. A.C. Graham suggested that the Confucian version of the story presented in the Book of Rites was the original, which was borrowed and re-interpreted by the followers of Zhuang Zhou. His birthday is popularly held to be the 15th day of the second month of the Chinese calendar. In accounts where Laozi married, he was said to have had a son who became a celebrated soldier of Wei during the Warring States period.