Once, Sage Vyasa went to meet Yudhisthira, who requested him to describe the significance of
Sage Vyasa replied– ‘O king! Once, Dharmaraj-Yudhisthira did an austere penance to please Lord Shiva. As usual, Indra became scarred because he thought that Dharmaraj was doing penance with the intention of acquiring Indraloka. He and other deities went to seek the help of Lord Brahma, who did not have any clue. So, all of them went to Kailash mountain to seek Lord
Shiva’s help. Since Shiva was aware of Dharma’s motive, he explained to the deities that there was nothing to worry about. But, Indra was not satisfied and the thought of loosing his kingdom continued to torment him.
Indra then instructed a beautiful Apsara named Vardhini to go to the place where Dharma was doing penance and disturb him by corrupting his thoughts. Vardhini went to the place where Dharma was engrossed in his penance and was successful in disturbing him. When Dharma opened his eyes he found a beautiful Apsara in front of him. Vardhini asked Dharma–‘O Lord! What is the objective with which you are doing such an austere penance? Being an embodiment of virtuosity yourself, you prevail in the whole world. So, in a sense you already the lord of the world – what else do you need?’
Dharma told Vardhini that he was doing penance with the objective of having a divine glimpse of Lord Shiva. Vardhini informed him that Indra was scarred of losing his kingdom and hence had sent her to disturb his penance. Dharma was pleased by her truthfulness and wanted to reward her for that. Vardhini expressed her desire of having her abode in Indraloka for eternity and also of having a place of pilgrimage named on her. Dharma blessed her after which she returned to Indraloka.
Dharma once again engrossed himself in penance. Ultimately, Lord Shiva became pleased and appeared before him. ‘Ask for any boon and it shall be bestowed to you’, said Lord Shiva. Dharmaraj replied -‘O lord! I want this place to be named after me. I also request you to grace this place by your presence.’ Lord Shiva blessed him and fulfilled both his wishes. This was how Dharmakshetra got its name. Subsequently, Lord Shiva appeared in the form of Dharmeshwar linga in accordance with the second wish of Dharmaraj. After his penance was over, Dharma also had created a holy reservoir over there which is believed to absolve a man of all his sins.