Bhootnath Mandir (temple) dedicated to Lord Shiva was established by King Ajbar Sen of Mandi state in 1527 BC. The history of Mandi Nagar is connected with the history of this temple. In ancient times, the capital of the princely state of Mandi was Purani Mandi. The place where this temple and the city are located was a deserted forest and the place was used for pasture. The present Mandi city was started by Raja Ajbar Sen in 1520 and the Bhootnath temple was completed in 1527 AD.

According to legend, a Brahmin cow used to release milk from her udders every day at this place in the old market. When King Ajbar Sen came to know about this and Lord Shiva gave an example, the king started digging at this place. When the Shivling came out of the ground, the king installed it and got a grand temple built here. By cutting the surrounding forests, a new city was established, which is today’s Mandi Nagar.

Mandav Rishi also used to do penance for Lord Shiva at this place. Once Lord Shiva appeared to Rishi Mandav along with ghosts and his ganas, due to which Rishi Mandav called Shiva as Bhootnath. This temple is a unique example of Shikhar style in which the precinct of the temple and the sanctum sanctorum are visible. Shivling is installed in the sanctum sanctorum of the temple. There is Sheshnaga in brass over the Shivling. A brass statue of Parvati is installed behind the Shivling. The brass copy of Ganapati is present in the temple.

There is a pinnacle above the sanctum sanctorum of the temple. The assembly hall of the temple is built on pillars. Narasingha, Vishnu, Radha, Krishna and Vaishno Devi have been established later in the courtyard of the temple. Worship is done in the temple at 10 am and 5 pm. The temple is worshiped four times during the days of Shivratri. Inside the temple, there are two drums made of Bakal wood for playing at the time of worship. The festival of Shivratri begins with the worship of Shiva in this temple. In every Shravana month, worship is done by offering water to the Shivling.