According to folklore, A salt merchant who was an ardent devotee of Lord Siva thought of taking a night halt at this place then called Boddupalli. A Siva devotee he used to sleep in the premises of temple during night halt. As he could not find any Siva temple, he poured the Salt on the Earth and placed measure (Manika in Telugu) on top it and offered prayers before getting into sleep. To his surprise, next day morning the measure transformed into a Stone resembling Linga. Hence, the village popular by the name Manikeswaram.
From the inscriptions, it is known that this temple was built by the Chola Kings in 11th century AD who stayed here during their journey.
Madukeswara Swamy Temple Manikeswaram is dedicated to Lord Siva and this temple is called Dakshina Kasi (South Kasi). As Manikeswaram Temple located on the banks of Gundlakamma which is similar to Kasi on the bank of River Ganga.