This is also an ancient temple, Saptakoteshwar having been the deity of the Kings of the Kadamba dynasty around the twelfth century. Coins found from this era mention the name of the deity along with that of the King Jayakeshi.
After the Portuguese conquest, in the year 1540 during the years of the Inquisition, once again the linga at the temple was removed. Soon afterwards, it was smuggled away by one of the locals named Narayan Shenvi Suryarao and taken to a place called Latambarsem where it remained for 3 years. In 1543, it was installed in a temple near the island of Divar.
The Maratha King Shivaji conquered the area in 1664. On one of his many expeditions to Goa against the Portuguese in 1668, he gave the order for the Saptakoteshwar temple at Narve to be rebuilt and the linga installed in its proper place. The stone plaque mentioning this order can still be seen near the temple entrance today.
The legend behind the name Saptakoteshwar is also quite interesting. According to the legend, seven holy sages once set out to pray to Lord Shiva near the place where five holy rivers met the sea. They prayed for seven crore years at the end of which, Lord Shiva appeared to grant their wishes and agreed to stay at the place in one of his incarnations. This incarnation is known as Saptakoteshwar (sapt means seven and koteshwar means lord of crores).
The most important festival celebrated at the temple, attended by thousands of devotees from Goa and other parts of India, is Gokulashtami which is considered to be the day on which Lord Shiva appeared in this incarnation to grant the wishes of the seven holy sages.