This reservoir is situated south west of Jagannath temple. It is one of the Pancha tirthas in Puri Dham. Markandeya Muni resides here and worships the form of Lord Shiva known as Markandesvara Mahadeva.
It is started in Skanda Purana that Puri dham is never destroyed, even during the time of annihilation. Markendeya Rushi was blessed to live as long as seven kalpas, or seven days of Brahma. At the end of each day of Brahma annihilation takes place: the entire earth is inundated with water and all residents perish. Due to blessing, Markandeya Rushi survived the annihilation, however there was nowhere for him to live. While he was floating in the waters he suddenly heard someone calling him, he saw an island with big banyan tree on it. That place was Purushottama Kshetra (Jagannath Puri). Markandeya Rushi looked around to find who was calling him, and under the banyan tree he saw Lakshmi-Narayan. He offered his prayers to Them, and They instructed him to climb the banyan tree, where he would see the childhood form of the Lord and enter into Him through his expanded mouth.
The Rushi climbed the tree and saw the Lord lying on top of a leaf, sucking His own toe. When Markandeya reached Him. The bay opened His mouth and the Rushi entered. There he saw all fourteen planetary systems and the entire cosmos created by Brahma. He started to travel towards the end of it, but could never reach it. Finally he came out through the neck of the Lord, and took darsana of Lord Prusottama. The Lord told Markandeya that the place was eternal and would never be annihilated. Markandeya desired to never leave this place. He stayed there near the Vayu corner of the Vata Vruksa temple, and worshiped Lord Mahadeva, who is very dear to Lord Purushottama.
On the bank of this pond there is also a temple of Nilkanthesava. The Markandeya Vata was situated east of the pond. After taking bath in Markandesvara pond one should take darshan of Markandesvara mahadeva, which gives the result of performing a rajasuya-yajna and ashvamedha-yajna.