Two legends are associated with Manikarnika Ghat: According to one, it is believed to be the place where Lord Vishnu dug a pit with his Chakra and filled it with his perspiration while performing various penances. While Lord Shiva was watching Lord Vishnu at that time, the latter's earring ("manikarnika") fell into the pit. According to the second legend, in order to keep Lord Shiva from moving around with his devotees, his consort Goddess Parvati hid her earrings, and asked him to find them, saying that they had been lost on the banks of Ganga. Goddess Parvati's idea behind the fib was that Lord Shiva would then stay around, searching forever for the lost earrings. In this legend, whenever a body gets cremated at the Manikarnika Ghat, Lord Shiva asks the soul whether it has seen the earrings.
According to ancient texts, the owner of Manikarnika bought King Harishchandra as a slave and made him work on the Manikarnika at Harishchandra Ghat. Hindu cremations customarily take place here, though a majority of dead bodies are taken for cremation to the Manikarnik Ghat.