At the end of Dwapara yuga, Sage Valakhilya and other rishis were performing a yagna at Badrikashram for the removal of doshas (sins or malefic effects) in Kaliyug, but faced many hindrances. Sage Narada then instructed them to go to Kunjavana on the banks of the Sharavathi where the divine trinity had once prayed to vanquish the asuras.
Later the trinity and Lord Ganesha visited the site to bless the sages and the elephant-headed god asked all the divinities to leave behind a portion of their goodness for the benefit of mankind, which were deposited in the sacred tanks Chakratirtha and Brahmatirtha. Since the sacred kunj (garden) was located on the left bank of the river (eda means left), the place was called Idagunji.
The panchakhadya or special prasad of this temple is quite famous, as are the Ganesha masks made out of vetiver (khus).