According to the history, this temple derives its name from Maharshi Kapila, who immersed himself in ardent Shiva Pooja to satisfy the Lord. With the unswerving devotion of Kapila Muni, the Lord Shiva and Parvati presented themselves at this location and blessed him. During this time the Kapila Lingam pierced through the ground, presenting itself, when the seven worlds were instantly devotionally involved with this Linga.

The Sri Kapileswara Shiva Linga is considered to be self-manifested or Svayambhu form of Lord Shiva. According to ancient texts the large lake, occupying the front portion of the temple also came into existence along with the Shiva Linga. On the auspicious occasion of full moon day of the Karthika month, all the teerthas( holy water) on the three worlds of heaven, earth and underworld converge on the Kapila Teertham. If you take a dip in the holy water during this period, you will be released from the worldly bonds of sin to attain Moksha at the mercy of Lord Shiva.