The name of the lake literally means "lake of the demon" in Sanskrit. It is also known as Ravan Tal, as it is considered to be the place of severe penance by Ravan, the demon-like King of Lanka in Hindu theology.
In Buddhism, Lake Manasarovar, which is round like the sun, and Rakshastal, shaped as a crescent, are respectively regarded as "brightness" and "darkness". Rakshastal is a saline lake. There is a short river named Ganga Chhu, which connects Lake Manasarovar with Rakshastal, believed to be created by rishis to add pure water from Manasarovar.
There are four islands in Rakshastal, named Topserma (Dose), Dola (the two biggest), Lachato (Nadzhado), and Dosharba. The islands are used by local people as winter pastures for their yaks.
In the Tibetan language, the lake is known as Lagngar Cho or Lhanag Tso, which means "the dark lake of poison".