In ancient times, Udupi was known as Sivalli and Rajathapeetapuram. Legend has it that Chandra, the Moon God , did penance here in a forest, propitiating Lord Shiva to redeem Him from a curse by Daksha Prajaapati. In Sanskrit, Udu means `star’ and Pa means `leader’. Chandra being the head of the stars, the place came to be known as `Udupi’. Since Shiva was worshipped by Chandra, the Lord is known as Chandramouleeshwara. This Shiva shrine is situated opposite to Sri Krishna temple. The Swayambu Linga changes colour thrice during the day -- black in the morning, blue at noon and white at night. The temple tank is known as Chandra Pushkarini or Madhwa Sarovar.

There is another shrine for Lord Ananteshwara. When Sage Parasurama redeemed the land from sea, he crowned his devotee Ramabhoja as the king of this land. He performed Ashwamedha Yaga on this holy soil. While ploughing the land prior to the yaga, he killed a snake accidentally. To redeem himself from Sarpa dosha (sin of killing a snake), he made a silver peetam (Rajatha Peetam) with images of snake carved on it. Hence the place acquired the name Sivalli or Siva-belli. The king installed a Linga Ananteshwara. Lord Parasurama is worshipped in Linga swarupa in this shrine. There is a 40-foot-high Deepa sthamba outside the shrine.