A major legend about this temple, begins with the visit of the Puranic sage Parashurama, one of the incarnations of Lord Vishnu. Seeing there, an ancient shrine of vibrant spiritual power in a dilapidated condition, the sage was grief-stricken and wanted to know its history. Thereupon, sage Narada appeared there and related to him the story of the temple. According to it, sage Sanaka and others, the sons of the creator Lord Brahma, churned the disk of the Sun to lessen its fierce heat. They mixed the dust, which was formed while churning, with the divine nectar of immortality, Amrita, and out of it gave shape to three spiritually to Lord Brahma presented them to Goddess Parvathi, the consort of Lord Shiva. Goddess Parvathi presented these Shivalingams to three kings who were doing intense austerities to invoke the Goddess, one in the "Treta Yuga" and the other two in the "Dvapara Yuga". Maandhatha was the king to whom the Goddess presented the Shivalingam in the "Treta Yuga", and Muchukundam and Shathasoman were the devotees who received the other two lingams in "Dvapara Yuga". Goddess Parvathi advised each of them to install the idols in such a place where no death of any creature had taken place or any dead body had fallen. After a long search for such a place, which was very difficult to locate, Maandhatha, the first one to receive the lingam, found out a small place of that description, only that much land which could accommodate a small plate. Thalika in Malayalam means a plate. It is said that the region came to be known as Taliparamba, which means the place large enough to accommodate a Thalika after this legend. Maandhatha installed his Shivalingam at this place.