Bhimashankar Temple is one of the 12 jyotirlingas, the holiest of holy shrines of Lord Shiva. The image of Nandi - Lord Shiva's vahana is installed just at the entrance of the temple. It is believed that the ancient shrine was erected over a Swayambhu Linga or a Self-Emanated Shiva Linga. Thus, the Linga is exactly in the centre of the floor of the Garbagriha or the Sanctum.
Bhimashankar Temple is situated in the ghat region of the Sahyadri hills in the village of Bhavagiri, 50-km north west of Khed, about 127 kms from Pune in Maharashtra. Bhima Shankar Temple lies on the banks of the river Bhima. Bhimashankar is also the source of the river Bhima, which flows southeast and merges with the Krishna River near Raichur.
The temple was built in the Nagara style and according to the legend, the ancient shrine was erected over a Swayambhu Linga or a Self-Emanated Shiva Linga.
Shiva stays here and known as Bhimasankara—a phallic image which shall be worshipped always. It will avert mishaps and be conducive to the attainment of all desires.
Legend as per Shiva Purana:
There was a Rakṣasa of great virility named Bhima who harassed all living beings and who spoiled virtuous rites always. This powerful demon was born of mother Karkaṭi and father Kumbhakarṇa. On his asking, mother informed him that Kumbhakarṇa the younger brother of Ravaṇa, that powerful demon was killed by Rama along with his brother. Infuriated hearing this, Bhima went to perform a great penance of Brahma.
Due to the penance, a terrible fiery splendour arose from his head. Scorched by it the gods sought refuge in Brahma asking him, to grant him his prayer. Brahma bestowed him a boon of a great strength, as desired by him.
Bhima of terrible exploit conquered the gods including Indra at the outset and ousted them from their respective positions. Then in a battle he conquered Vishnu. After conquering the lord of Kamarupa who was a servant of Shiva, including his kingdom and its adjuncts was seized by that wicked Bhima. The virtuous king made an excellent earthen idol of Shiva and started its worship. The couple, devoutly engaged in the propitiation of Shiva worshipped the deity, with single-mindedness. Harassed gods eulogised Shiva by means of prayers. Shiva was delighted and said them, “I shall kill Bhīma who is wicked, whose power is enhanced by the boon granted by Brahma and who has insulted you.”
With a desire to accord benefit to him Shiva stayed with his devotee along with his Gaṇas. The lord of Kamarupa in front of the earthen idol of Shiva started meditation. Then somebody informed the Rakshasa, “The king is performing a black magic against you.” On hearing it the Rakshasa was infuriated. With a desire to kill him he seized a sword and rushed at the king. Bhima threatened the king and asked him to tell the truth and to remove all the idols of Shiva. Emboldened and meditating on lord Shiva, the king did not comply with your threats. Thus, addressed by the king, the demon rebuked him and hurled his terrible sword at the earthen idol. No sooner did the sword touch the earthen idol than Shiva manifested himself from the earthen idol. Shiva split the sword into two with his Pinaka. His spear was then hurled by the Rakshasa. That spear too of the wicked Rakshasa was split into a hundred pieces by Shiva. Then a lance was hurled at Shiva by him. It too was split into a hundred-thousand pieces with his arrows by Shiva. Then a huge iron club was hurled at Shiva by him. Within a trice, it too was reduced to small pieces like gingelly seeds by Shiva with his trident. On request of Narada and deities, Shiva reduced the Rakshasa to ashes with only a Huṃ sound for his weapon.
Reference: Shiva Purana, Koṭirudra Saṃhita, Chapters - 20. 21