The legend of goddess Khodiyar dates back to 700 AD. It started from a village named Roishala of Vallabhipur region in Gujarat. King Shilbhadra was the ruler of that region and his best friend was Mamaniya Gadhvi. Mamaniya was truthful, modest and was an articulate Shiv devotee. The king used to converse with Mamaniya for long hours at his palace and refer to him for vital governance matters. Such coalition between king Shilbhadra and Mamaniya was coveted by several ministers in the king's council.
According to Hindu mythology, lord Shiv, for whom Takhteshwar Temple is dedicated is regarded as the destroyer, creator and preserver of the universe. Historical records states that the rulers of Bhavnagar city created the temple and termed it after the benefactor. It is observed that before creation of Takhteshwar Temple, the hill in Bhavnagar city was served as one of the sightseer spot for travellers that arrived or left the bay of Cambay.