The original name of the pagoda was Dien Huu pagoda which literally means long lasting happiness and and good luck. The pagoda is situated in the western part of the city. It was first built in 1049 in the reign of King Ly Thai Tong. legend has it that at time King Ly Thai Tong was very old and had no sons of his own. One night he had a dream that he was granted a private audience with Buddha with a male baby on his hands. Buddha seating on a lotus flower in a square-shaped lotus pond in the western side of Thang Long Citadel, gave the king the baby. Month later the queen got pregnant and she gave birth to a male. To repay the gift from Buddha, the king ordered the construction of a pagoda with was supported by only one pillar resembling a lotus seat on which Buddha had been seated. The pagoda was dedicated to Buddha.

The lake which is not as large as Ho Tay to the northwest is situated in the center of the city. Because of its unique location Sword Restored Lake is billed as a basket of lower placed in the middle of Hanoi. The name of Sword Restored Lake is derived from a legend which has it that King Le Thai To had a precious sword. The sword. The sword had always been on his side during the 10-year resistance against the Ming aggressors. After he won over the foreign aggression and returned to Thang Long Citadel. One day he went out and boarded a royal boat to cruise in the lake. Suddenly he saw a giant turtle emerging and coming towards him.

The king withdrew his sword and pinpointed with the sword the direction of the coming turtle for his soldiers' attention. All of a sudden, the turtle caught the sword between its teeth from the king's hand and submerged. The king thought that it might have been that during the resistance war against the Minh aggression, the king was offered sword by genie to help him defeat the enemy. Now when peace has returned the genie appeared and took back the sword. With that thought in mind, King Le Thai To named the lake after episode as Ho Hoan Kiem (Lake of Restored Sword).