The lake takes its name after the eminent Buddhist guru Padmasambhava - also known as Guru Rinpoche, founder of Tibetan Buddhism - who visited in the 8th century. He travelled from India to Tibet and stopped at several locations along the way, including this lake. According to a popular folktale, the towns near the lake had a severe water shortage each winter. After receiving a request for assistance from the locals, Guru Rinpoche blessed the frozen lake, causing some of it to melt. Interestingly, locals say that one area of the lake never freezes, not even in the coldest winters. They attribute this to divine power. The lake's holy waters are thought to have miraculous healing properties, making it one of the most significant pilgrimage places for locals. A different version of the same legend gained popularity when the Indian army established a base close to the lake due to Sikh soldiers who believed Guru Nanak, not Padmasambhava, had dedicated the lake.