Nageshwar is in close proximity to the city of Dwaraka, and falls on the way to Beti Dwaraka. The story which originates to thousands of years ago goes like this that there lived in this area a vicious demon by the name of Daruka, who though he was a very staunch devotee of Lord Shiva , took great pleasure in torturing and harassing the good natured people of the area.
One fine day, a merchant by the name of Supriya, who was a strong Shiva devotee, sailed into the area with his goods, at the place where Daruka lived with his wife Daruki, and Daruka requested Supriya to guide him on the path of devotion to Siva, by explaining the norms of performing pooja and penance. Sensing that Daruka could put to bad use any powers gained by him through such penance, Supriya refused to cooperate with him. This of course was bound to enrage Daruka who then began to torture Supriya, who being a firm believer in the Lord and was not reacting to the torture. Lord Shiva was extremely pleased at this and suddenly appeared to kill the demon Daruka. After this , Daruki, Daruka's wife, ventured out and started creating even more even more trouble than her husband.ever had , leading to Lord Shiva vanquishing her as well, and giving darshan to his devotees at this place in the form of Nageshwar.
The Nageswara Jyotirlingam is claimed to exist in 3 places, one at Dwarka, another at Audhgram,and the third near Almora in Uttar Pradesh.The Siva lingam is facing in the south direction, with the Gomugam facing towards the east direction, and there is an interesting story one recounts about this position, wherein a devotee by name of Naamdev was singing bhajans in front of the Lord, and on seeing this some of the other devotees requested him to stand towards the side so as to not obstruct the view towards the Lord. Reacting to this Naamdev in turn told them to suggest at least one direction in which the Lord was not present so that he could go and stand at that place.. This of course, though not intended, enraged the devotees and they virtually carried out Naamdev, leaving him on the southside. Lo and behold , to the amazement of all, they now found that the Linga was facing South with the Gomugam facing East. This was an eyeopener, and the message came out loud and clear to all the devotees gathered there in worship of the Lord Almighty !