The legend of Murudeshwar goes back to the age of Ramayana. Ravana, the asura king of Lanka, wished to have the all powerful Atmalinga of Shiva, so that he can become invincible and immortal by worshipping it. Pleased by his severe penance, Lord Shiva gave him the Atmalinga but warned him not to place it on the ground till he reached his destination. Upset by the thought that Ravana would become more powerful by worshipping the Atmalinga, the Gods devised a plan to take it away from Ravana. The Gods knew that Ravana being a pious devotee of Lord Shiva was punctual in performing the periodical rites everyday.

As Ravana approached Gokarna, Lord Vishnu blotted the sun with his Sudharshana Chakra. Thinking that it was evening, Ravana was in two minds whether to put down the Atmalinga or skip his evening rites. Just then, Lord Ganesh came to that place in the guise of a brahmin boy. Ravana called the boy and asked him to hold the linga until he completed his evening rites. The boy agreed on the condition that he'd keep the linga down if Ravana didn't return before the boy called out his name thrice. Ravana agreed and went about his rituals, but by then the boy called out his name thrice and place the Atmalinga on the earth, and it got firmly entrenched in the earth.

When Vishnu withdrew his Sudharshan chakra, Ravana saw bright sunlight and understood that he was tricked by the Gods. He became furious. He came to the Linga and tried to uproot it with all his might. But the idol did not budge even a liitle. The idol's shape now looked like a cow's ear. Hence, the place is known as Gokarna. [Go means Cow and karna means Ear in sanskrit.] The crest fallen Ravana was deeply upset and beat the boy on his head. In anger he pulled and threw the case of linga, which fell 23 miles away at Sajjeshwar. He threw the lid to the south 27 miles away at Guneshwara in the form of “Vamdev Linga”. He threw the cloth wrapped to the idol to south, 32 miles away at Kanduka hills on shore of sea. It took the form of “Aghora”at Murudeshwar. The thread winding the idol was flung to south at Dhareshwara, came to known as “Tathpurusha Linga”.

Shiva learnt all this from wind god Vayu. He came on earth along with Parvathi and Ganesha and visited all these five places and worshipped the linga. He declared that these would be his Panchakshetras and those who worshipped lingas at those places would be free from all sins and their wishes would be fulfilled and ultimately reach the abode of Shiva.