Situated on the left banks of Dal Lake, right opposite the Nishat Bagh, the grandiose Hazratbal shrine (mosque) is a highly revered site. The mosque is believed to house Moi-e-Muqqadas the sacred hair of Prophet Muhammad's beard. It is said to be dating back to the 17th century.

Legend has it that the relic was first brought to Kashmir in 1635 by a purported descendant of Muhammad Syed Abdullah, who left Medina and settled at Bijapur near Hyderabad. After his death, the relic was inherited by his son, Syed Hamid. By this time, Mughal conquest had started and Hamid was stripped of his family estate. As he was unable to take proper care of Moi-e-Muqqadas, he sold it to a Kashmiri businessman. Emperor Aurangzeb came to know about this incident so he seized the relic and imprisoned the businessman in Delhi. He then sent Moi-e-Muqqadas to Ajmer's Khwaja Moinuddin Chishti shrine. Sometime later, Aurangzeb realised his mistake and decided to release the businessman and send him with the relic back to Kashmir. However, he had died in prison by then. The relic finally reached Kashmir in 1700 along with the body of the businessman and his daughter, Inayat Begum, became the custodian of Moi-e-Muqqadas and established the shrine. On December 26, 1963, the relic mysteriously disappeared from the shrine but was recovered on January 4, 1964.