The story of origin of kusha grass and how kusha grass become holy is found in the Ramayana.
According to Ramayana, when Lord Rama sent Sita Mata to the forest to live in the hermitage of Sage Valmiki, she gave birth to two sons, Lava and Kusha.
After some incidents, Mata Sita prayed to Mother Earth to accept her back. To answer her prayer, Mother Earth created an earthquake and Mata Sita disappeared into the earth.
Seeing his mother being swallowed by the earth, Kusha ran forward to save her; but all that he could get hold of was Sita’s hair which, as the earth closed, turned out to be grass.
Kusha Grass is mentioned in the Rig Veda for use in sacred ceremonies and also as a seat for priests and the gods.
Kusha grass is recommended in the Bhagavad Gita by Lord Krishna as the ideal seat for meditation. (Establishing a firm seat for himself, In a clean place, Not too high, Not too low, covered with cloth, and antelope skin, and kusha grass (Gita VI - 11)
Kusha Grass Origin And Samudra Manthan
It is mentioned in the Puranas that that the kusha grass came into existence during the Samudra Manthan, churning of the ocean.
When the gods and demons got ready to churn the cosmic ocean there was nothing to support the base of the Mandara Mountain. So, Lord Vishnu assumed the form of the Cosmic Tortoise (Kurma Avatar) and gave the needed support.
During the churning, the hairs of the tortoise rubbed off and were washed ashore and became Kusha.
When Amrita, the nectar of immortality was finally achieved, few drops of it fell accidentally on the Kusha grass thus imbuing it with healing properties.