Legend has it that Hindu god, Rama paused at that spot on his way from Ayodhya to Lanka in pursuit of the demon king, Ravana who had kidnapped his wife, Sita.

Then Lord Rama was advised to worship Shiva lingam and he is said to have constructed the original linga of sand, after getting tired of waiting for his brother, Lakshman to bring an idol.

The name is etymologically derived from the Sanskrit word for an idol made of sand -- Valuka Iswar, an Avatar of Shiva.

The temple and the attached fresh water Banganga Tank were built in 1127 AD by Lakshman Prabhu, a Chandraseniya Kayastha Prabhu minister[2][3][4] in the court of Silhara dynasty Kings who ruled Thane, and the islands of Mumbai during 810 to 1240 AD.

It was rebuilt due to the generosity of Mumbai businessman and philanthropist, Rama Kamat, a Gaud Saraswat Brahmin (known in British records as 'Kamati') in 1715.