The Temple was constructed in the early 11th century CE by the Chola king Kulothunga Chola-I and was expanded further in 1336 by the Emperors of Vijayanagara dynasty.
There is an interesting legend about the sthala purana of this ancient temple which has 1000 years’ history. About 1000 years back, three physically handicapped blind, dumb and deaf persons were eaking their livelihood by cultivating a piece of land near Viharapuri village. On one day two persons were taking out water with the help of a picot and the third person was irrigating the land. After some time, water was exhausted in the well. One person took a spade and hit a stone inside the well and blood started flowing continuously. When the three handicapped persons touched the water mixed with blood, surprisingly they became normal persons. After digging for some time they found an idol of Sri Varasiddi Vinayaka in the well with an injury on the head oozing with blood. They could not take out the idol as it was growing in size, as they were digging. They informed the villagers about this surprising phenomena. People came running with coconuts and other Pooja materials to worship the Sri Varasiddi Vinayaka. They broke thousands of Coconuts, the coconut water was spread to an area of one and quarter acre. In the local language it is called as "Kani". That is how the place was called as "Kanipakam" since then.
Even now we can see the well around Sri Varasiddi Vinayaka idol. Always water is seen around the idol. We can also see the wound on the head of the idol.Another astonishing feature is that the idol is growing in size. In 1947 a devotee Sri Bezawada Siddaiah of Aragonda Gollapalli village presented a Silver Kavacha to the Lord which correctly fitted the idol. Now, it is not fitting the idol. As the idol is growing in size. Always there will be water at the same level around the base of the idol in all seasons. This sacred water is given as theertham to all other devotees.
Kanipakam where Sri Vinayaka Swamy emerged as “Swayambhu” is located by the side of Bahuda River. There is an olden Puranam for calling the River as Bahuda. After the self-elevation of Lord Vinayaka Swamy at Kanipakam, two brothers namely, Sankudu and Likhithudu wanted to have Darshan of Lord Swayambhu Sri Vinayaka and they made their journey by walk. After having Prolix journey, the younger Likhitudu became very tied, hungry and wanted to take mango fruit from the tree, and asked his brother to help him. The elder brother warned him not to take the fruit, since it belongs to the king. But the younger brother who was too tired, hungry and thirsty took the Mango fruit and ate it. The Elder brother Sankudu dragged his younger brother to the king and narrated the theft of fruit committed by his brother and requested to impose punishment. Unfortunately, the king became angry and vehemently ordered to cut off the both hands of the younger brother who had stolen the fruit without permission, and the punishment was implemented.
The Elder brother became very sad for this unfortunate incident which resulted loss of hands of his brother and at last he desired to take a holy bath in the river near the Swayambhu Vinayaka Temple before going to darshan, and when both the brothers immersed in to the river by praying the Lord Vinayaka. Surprisingly, the hands of the younger brother Likhitudu have come out as existing earlier. Then both the brothers have taken the darshan of the Lord Vinayaka Swamy and offered their vows for blessing them. After that, the two brothers propagated the kindness of Swayambhu Sri Vinayaka among the neighbouring villagers. After that the river in which lord Vinayaka gifted the lost hands (Bahuda) to Likhithudu is called as “Bahuda River”.
Resolving disputes: It is believed that people come here and resolve their disputes by taking a "Special Oath". As per rituals the people in dispute take a holy dip in the temple tank and swear before the lord. Here is that if a person swears(Pramanam) about a particular incident, it is taken as 'truth'. Most of the disputes are settled by this method. People take it as more than a court judgement. If anybody does false swearing before him, Sri Varasiddi Vinayaka shall punish him. For this swearing ceremony a sum of Rs. 516/- is collected by temple authorities. This ceremony is done every day. Thus people get instance justice here.
In the ancient Vedas Sri Varasiddi Vinayaka hailed as possessor of gunas of all gods, gandharvas, demons and human beings. In 'Adarvaseershopanishath' Sri Varasiddi Vinayaka is extolled as the parabhramha embodiment of paramathma that have (The absolute). Hence by taking 'Ganapati deeksha' the devotees can fulfill all their wishes with the blessings of Sri Ganesha. The deeksha will be for an of 41 days (Mandalam), 21 days (half mandalam), 11 days(Ekadasa). It is like Swamy Iyyappa (or) Lord Sivadeeksha. And the rules and regulations are almost the same. Sri Ganesh Deeksha can be started in any Ganesh temple but should end at Sri Varasidhi Vinayaka Temple at Kanipakam only.
The significant feature of the Moola Vigraha (Main deity) is that it faces towards north, which is a rarity. The first rays of the sun, fall on the feet of the Lord. Gradually the sun rays disappear after reaching the head of the Lord. The main idol is said to be growing in size, year after year, and the silver Kavacham of various sizes since 1945, are displayed at the main entrance of the temple.