According to a folk legend about Kedarnath, the Pandavas - the heroes of the Hindu epic Mahabharata - wanted to atone for the sins committed during the Kurukshetra war. They handed over the reins of their kingdom to their kin and left in search of Lord Shiva to seek his blessings. However, Shiva was not interested in meeting them, and so he assumed the form of a bull (Nandi) to avoid them. Bhima, the second of the five Pandava brothers, saw the bull grazing near Guptakashi ("hidden Kashi" - the name derived from Shiva's hiding act). Bhima immediately recognized the bull to be Shiva. He caught hold of the bull by its tail and hind legs, but the bull-formed Shiva disappeared into the ground and later reappeared in parts. The hump raised in Kedarnath, the arms appeared in Tungnath, the face showed up at Rudranath, the nabhi (navel) and stomach surfaced in Madhyamaheshwar, and the hair appeared in Kalpeshwar. The Pandavas were pleased with this reappearance in five different forms, and so they built temples at the five places to venerate and worship Shiva. These five places are collectively known as Panch Kedar.

According to the hagiographies based on Madhava's Sankshepa-shankara-vijaya, philosopher Adi Shankara, who lived in the 8th century, is said to have died in the mountains near Kedarnath. However, other hagiographies based on Anandagiri's Prachina-Shankara-Vijaya suggest that he died in Kanchipuram. The ruins of a monument marking Shankara's purported death place are located in Kedarnath. Kedarnath has been a prominent pilgrimage center since at least the 12th century when it was mentioned in Kritya-kalpataru, written by the Gahadavala minister Bhatta Lakshmidhara. It is believed that Adi Shankara revived this temple, along with Badrinath and other temples in Uttarakhand. He is said to have attained Mahasamadhi at Kedarnath. The Kedarnath Teerth Purohits are the ancient Brahmins of this region, and their ancestors (Rishi-Muni) have been worshiping the lingam since the time of Nara-Narayana and Daksh Prajapati. King Janmejay, the grandson of the Pandavas, gave them the right to worship this temple and donate to the entire Kedar region. They have been serving pilgrims ever since.