The story of Śatarudra was imparted to Śrī Rāma by Vyāsa to show that all life is mere illusion or different complexes of the mind. Śatarudropākhyāna is the story of a contemplative sannyāsin. Whatever subject or object he conceived in his mind used to assume its form as water changes into waves, and it was a boon or great asset, which his heart had acquired as a result of its purity. He confined himself to his āśrama and thought about things one after the other.

To start with, Śatarudra thought to himself that he was a 'dream person' called Jīvaṭa. While picnicking in the streets of a 'dream-built city' the 'dream person' overcome by the effect of liquor remained in an unconscious state for some time. He also felt immediately to be a brahmin learned in the Vedas. 'Jīvaṭa', who transformed himself thus into a brahmin slept during day-time overcome by exhaustion on account of work. At once he dreamt himself to have been transformed into a feudal lord or tributary King, who, after taking his meals went to sleep when he dreamt that he was changed into a great King. The King, who ruled the country peacefully changed himself one day in dream into a celestial woman. The next dream was that the woman, while in deep sleep after a hilarious sexual act, was turned into a she-deer. The she-deer, in dream turned into a creeper, and it duly bore leaves, flowers and fruits. The creeper felt that it entwined and climbed some trees. Then he (Jīvaṭa) went into deep sleep, absolutely unaware of himself, for some time. Then he dreamt himself to have changed into a beetle. The beetle felt attracted towards a lotus flower and got captured therein. An elephant from the forest nearby entered the 'lotus pond', plucked and tore into pieces the lotus flower. As the beetle had got fixed in its mind and imagination the picture of the elephant it became a tusker elephant after its death. While roaming about in the forest the elephant fell into a deep pit and the King’s men captured and listed it in the army. A number of beetles gathered round the elephant to suck its ichor (madajala). Because it thought about the beetles the elephant, after its death in battle, again became a beetle, which imagined about the swan in the lotus-pond. The beetle one day got captured in the lotus-flower and became a swan on being killed by the elephant. Thus the beetle, after taking many births and forms, became ultimately Brahmā’s vehicle, the swan. While the swan once moved about the surrounding places of mount Kailāsa it saw Rudra and imagining itself to be Rudra (Rudroham—I am Rudra) attained Rudrahood. While living happily with all the paraphernalia of Rudra he remembered his past lives, and wondering about the many continuous dreams of his, in solitude he thought like this:—"The power of Māyā (illusion) which rules over everything in the world is really wonderful. How curious and peculiar is the cunningness or trickeries of Māyā in creating, like mirage, the illusion that things, which did not really exist, existed. Mistaking Māyā or mirage as the truth and the fact, I roamed about in many a material desert. In one form of life I was born as Jīvaṭa, in another, King: in yet another, swan etc. and now I have attained Rudra-hood. Hundred Caturyugas and thousand years have passed in this 'show" Now, I will return and personally see all past episodes and I shall identify them all with myself after bestowing knowledge on them.

Having made up his mind like this, Rudra descended to the state of the old Sannyāsin. He infused life and vitality into the dead body of the sannyāsin that was there. The Sannyāsin remembered his old illusions and hallucinations. He had attained Rudrahood after crossing various stages from being Jīvaṭa. Then both of them together came to the Jīvaṭa stage, awoke the 'dream-person' by giving him mind and vitality. Afterwards the three of them, who assumed single form by the composition of different personalities, attained various stages like brahmin etc., awoke them too and added them to themselves (the three). Thus there came about to be hundred persons formed from aspects or fractions of Rudra, and at the instance of the real Rudra they returned to their homes and lived there happily with their sons, relations etc. Those hundred persons are the Śatarudras. (Jñānavāsiṣṭha, Śatarudropākhyāna). In Verse 13, Chapter 150 of Anuśāsana Parva, Mahābhārata also is found references to the Śatarudras.