There is a story behind the existence of the temple. As per legendary, the temple is more than four hundred years old and had been founded by Mahant Sri Purushottam Dass Ji Maharaj.
It is said that during the pilgrimage to Chitrakoot on a bullock cart, Maharaj had stopped near Chitrakoot for his morning prayers and while continuing the journey after prayer, he stumbled upon a rock like thing.
It was an idol of Lord Hanuman and by divine intuition he carried the idol with him in the bullock cart. When the crew reached Panki, Maharaj found that the bullock cart was unable to move because of heavy load of the Lord.
Finally, Mahant installed the idol according to divine direction at the very same place and then onwards people started worshipping Lord Hanuman. Later a small temple was built here which came to be known as Panki Hanuman Temple.