A few kilometers away from Mandi is Rawalsar. Rawalsar has a great significance, as it was sanctified by the visit of tenth Guru Gobind Singh. A Gurdwara was constructed here by Devotees of the Guru to perpetuate his memory. Adjoining the Gurdwara is a big tank, whose water has medicinal value. A dip in this tank is considered auspicious. The Gurdwara is built of stone and one can it by climbing 108 stairs. People visit this Shrine with great Devotion.  It is a sacred place for Buddhists too. Many people from Tibet come here on pilgrimage, to pay homage to Buddhist Shrine situated here.

Rawalsar is a natural lake with floating islands, about 15 kilometers west of mandi town. The habitation that has grown around it is also named Rawalsar. Guru Gobind Singh visited it once on the occasion of Baisakhi festival. It was here that Raja Siddh Sen of Mandi met the Guru and took him to Mandi with him. The commemorative Sikh Shrine here is called Gurdwara Damdama Sahib. It is located on the hillside at some height from the lake and its dome is visible from a distance. Rawalsar is particularly sacred to Namdhari Sikhs. Because of some allusion to it in Sau Sakhi as a sanctuary, many Namdharis went to settle there during early 1940s, but as this small hilly place could hardly absorb them, most of them came back; yet many settled at the nearby Mandi town from where they keep visiting the lake and the Gurdwara frequently