According to legend, the origin of Karipody Muchilot is believed to be linked with Periyodi Achan, a devout devotee, from the Perumudi Nair Tharavadu (family) in north Malabar. He was suffering from leprosy. One day he met a divine girl near Karivellur. She gave him Bhasmam (sacred ash). After consuming this bhasmam, he recovered completely from the disease. A happy and relieved Permudi Nair went in search of the girl who saved his life and decided to stay back in Karivellur until he found her. But she was elusive. A divine voice supposedly commanded Perumudi Nair to go back to his home in Karipody. As he headed back home via Athiyal, he felt the presence of Devi with him. Upon reaching the Thrikkannad Shiva Temple, he kept his umbrella beside him and started praying. After completing his prayers, he tried to lift the umbrella, but to his surprise, he could not do so. Apparently the divine presence was still with him. He could only lift the umbrella after promising to do whatever Bhagavathi desired. After reaching home, he kept the umbrella near a Pala tree. The umbrella started moving by itself. This told him that this was the ideal location for the temple. Perumudi Achan directed a boy from Vaniya Community to light a lamp near the tree and later constructed a Muchilot temple at that location.

After constructing the temple, Permudi Nair tried to perform Kaliyattam. As per the astrologers of that time, Muchilot Bhagavathi wanted Mannarkkadan Gurukkal to perform Theyyam of Muchilot Bhagavathi at the first Kaliyattam. But Mannarkkadan Gurukkal was eighty years old and blind. Despite his disability, he agreed to perform the Theyyam, and observed the customary seven days’ vratham (fasting) and prayers. At the end of it, he got back his sight and could perform Muchilot Bhagavathi’s theyyam without any difficulties.