There was a poor man named Sudharma. He lived on a mountain named Devagiri along with his wife Sudhesha. He earned his living by teaching Vedas.
The couple was childless. When all possibilities were exhausted, Sudhesha got her sister Ghushma married to Sudharma.
Ghushma was an ardent devotee of Shiva. She used to daily prepare Shivling from mud and offer prayers to Shiva. After prayers she used disperse the Shivling in a nearby lake.
In time Ghushma bore a child. Sudharma was happy with his second wife and son.
Sudhesha, the first wife, now felt jealous and one day killed the step son and threw the body in the lake.
The entire village was unhappy at the events. But Ghushma, a great Shiva bhakta, accepted this as the will of Shiva. She started worshipping Shiva. She did not move an inch even after seeing the body of her son. All she said was he who has given me this son will protect him.
Shiva was then pleased with her unwavering devotion and brought back the son to life. Ghushma did not show any emotions on seeing her son. She only prostrated before Shiva.
Pleased with her firmness in devotion, Shiva offered her a boon. Ghushma asked Shiva to stay in the place to bless the millions of people who suffer out of ignorance. Shiva readily agreed and came to be known as Ghusmeshvar, the lord of Ghushma. The shrine is today popularly known as Ghrishneshwar.