The Tibetan calls the lake as Tso-Pema, meaning the Lotus Lake. Legend has it that the king of Mandi tried to kill Guru Padmasambhava when he got to know that his daughter Mandarava is running off with him. The king tried to ruin their love by cursing them to die in a fire. By using his supernatural powers, Padmasambhava transformed the funeral pyre into a lake of sesame oil, surrounded by a ring of fire. In the middle of the fire bloomed a huge lotus flower on which Guru Padmasambhava was seated surrounded by rainbows and clouds. People even say that the Guru Padmasambhava’s (Guru Rinpoche) spirit resides in this lake in the form of a tiny reed flowing in the river.
Overlooking the lake, there is a 12 m-high statue of Padmasambhava, which is the main attraction of the place. Rewalsar has three Hindu temples which are dedicated to Lord Krishna, Lord Shiva and to the sage Lomas. Rewalsar also has three buddhist monasteries replete with imposing murals in the Indo-Tibetan style and a gurdwara, which was built to commemorate the visit of Guru Gobind Singh , who stayed here for a month. Every year, the place shrugs off its calm during the months of the Sisu and Baisakhi festival.