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According to the renowned British Raj era historian and epigraphist B. Lewis Rice, legend has it that once a merchant carrying grain on bullocks stopped at Sibi. When a pot of grain was boiled on a projecting rock, its color turned blood red causing the merchant, his attendants, and the buffalos to swoon. While in the unconscious state, the god Narasimha appeared in the merchant's dream and informed him the rock was his abode and that the merchant should build a temple for him at that spot as atonement for desecrating his abode. A small temple was thus built by the merchant. In more recent times, the consecration of a larger temple over the pre-existing shrine was taken up by three wealthy brothers: Lakshminarasappa, Puttanna, and Nallappa who were the sons of Kacheri Krishnappa, a Dewan in the court of King Tipu Sultan of the Mysore Kingdom. The story goes that Nallappa had a dream in which the god Narasimha promised him eternal happiness if a temple was raised where it stands today. The completion of the temple construction took ten years. 

The Narasimha Swamy temple is a simple yet elegant Dravidian structure built around the end of the 18th century. The main deity of the temple is Narasimha, an avatar (incarnation) of the Hindu god Vishnu.

The tower over the entrance is three-tiered and the temple has a large prakara (bounding wall) which makes for a large courtyard. The open mantapa (hall) leads to a closed mantapa (or navaranga) which has minor shrines for several Hindu deities: Rama, Ambegal Krishna, Sriranga (a form of Vishnu in the reclining posture), Narasimha (Vishnu with the head of a Lion), Ganesha and Saptamatrika.

The main attraction in the temple is the mural paintings on the ceiling and walls of the mukhamantapa (entrance hall) which depict courtly as well as religious themes such as scenes from the Hindu Puranas (epics): the Bhagavata, the Narasimha Purana, the Ramayana, and the Mahabharata. The murals follow the same artistic idiom found in the murals of the Daria Daulat Bagh in Srirangapatna.

The murals on the walls and ceiling are divided into three rows: The first row depicts the Krishna Leela ("Krishna's play") of the god Krishna, the second row depicts a scene from the court of Maharaja Krishnaraja Wodeyar III with Nallappa (one of the sons of the Dewan Krishnappa) in attendance, while the third row depicts a scene from the court of Haidar Ali and his son Tipu Sultan with Kacheri Krishnappa, and Ravanappa and Venkatappa (maternal uncles of Nallappa who held high posts) in attendance. The ceiling of the main entrance mantapa has a mural in which the god Krishna plays the flute to other cowherd friends while watching Tipu Sultan fighting a Tiger. The ceiling has four beams each with a mural: the first depicts riderless horses followed by elephants; the second depicts horsemen wearing conical caps (common during the Vijayanagara era) with some Horsman in gallop, others carrying flags and a couple on foot; the third depicts horseman, some riding and others on foot followed by elephants and a cart carrying cannons. Michell concurs regarding the likeness these murals bear to the ones in the Virupaksha temple at Hampi as well as at the Siddheshvara temple at Holalgundi, also a late 18th-century construction.