According to Chan tradition, the school can be traced to a time when the Buddha gave a sermon to his disciples in India.
On that occasion, instead of speaking, the Buddha was completely silent. Instead of speaking, he just twirled a flower.
Only one of his disciples, Mahakasyapa, comprehended the meaning of this act, and so he smiled.
Thereupon the Buddha said that he would transmit to Mahakasyapa a “subtle” (= beyond ordinary comprehension) Dharma that was beyond anything in the scriptures.