The bank was established under the Bank of Tanzania Act 1965. However, in 1995, the government decided that the central bank had too many responsibilities, and was thus hindering its other objectives. As a result, the government introduced the Bank of Tanzania Act 1995, which gave the bank the single objective of monetary policy.
It is governed by a Board of Directors consisting of ten people, four of whom are ex officio members which have three advisory committees that can assist them. The bank is headed by its Governor, assisted by three deputy governors in Administration, Economic and financial policies and Financial stability.
Recently, Bank of Tanzania was involved in an incident which resulted in an audit of its External Arrears Account. About Tshs133 billion were discovered to have been lost in 2005 through dubious payments. As a result, the President of Tanzania fired the bank's Governor, D. T. S. Ballali, on 9 Jan 2008. Professor Benno Ndullu was appointed to take this position on the same day.