The shrine of Baidyanatha is said to have its origin to a Santhal. As per the legends, it is said that in the olden time a tribe of Brahmans settled on the banks of the highland lake near the temple.
The black races of Santhal lived among the forest and the mountains. The newcomers of Baidyanatha, the Brahmans placed the symbol of Shiva near the lake and made sacrifices. But the black tribes did not worship the new got. The Santhals continued to worship the three great stones which their fathers worshipped.
After some time, these Brahmans of Baidyanatha became sluggish and neglected the worship of Shiva. This surprised the Santhals and finally one of them called Byju declared that he would beat the symbol of the Brahman's god Shiva every day before touching the food. This man of great strength and rich in cattle did so. But, one day his cows lost into the forest. He looked for them whole day but could not find them. He came home hungry and weary, bathed in the lake and sat down to supper. He then remembered of his vow and beat the idol with his club although he was very tired.
Suddenly a huge form came out from the waters and said, "Behold the man who forgets his hunger and weariness to beat me, while my priests sleep at home and give me neither to eat nor to drink. Let him ask of me what he will and it shall be given."
At this Byju answered that he is strong of arm and rich in cattle and the leader of his people and he does not need anything else. So, he asked that if he can be referred as the Lord and the temple of Shiva at Baidyanath can be known by his name. The deity agreed with his wish but said that after this he will be known as Byjunath and not Byju and the temple will be called by his name.
The Baidyanatha temple has the figures of four bulls in the right of the doorway. These four bulls represent the Nandi, the Vahana or vehicle of Lord Shiva. All these four bulls at Baidyanatha are of different sizes but none of them are as large as a calf. The emblem of the deity in the Baidyanatha temple is situated in the innermost sanctum, which is dark amid the blaze of noon. A lamp can be seen in front of the deity, which burns day and night, fed with ghee. A little stone can be seen under its light. This stone comes out of the ground and not higher than a span. It is Baidyanatha himself that stands manifest and greets the eye.