There are questions posed by many regarding the religion in Khajuraho during its flourishing days. Even the very existence of religion here has been questioned. There is, however a very common belief that Khajuraho is a place for "free love". The name Khajuraho has become synonymous with erotic sculpture, and it is known to many as just a place of erotic display in stone. This however, does not seem to be the idea behind Khajuraho. Of the total number of sculptures that adorn the walls of Khajuraho, hardly one tenth of them are erotic. There are several images of divine beings, with many holding manuscripts and several others in yogic postures. Khajuraho was a place of worship and religious discourses were also held here. Many religious sects received patronage from the Chandellas. It is important to note that the monuments at Khajuraho were temples, built by their patrons primarily for the sake of worship. It is a well known fact that temples were the centres of both religious and artistic expression in medieval India.

Maniya Devi, a tribal goddess, was supposed to be the guardian deity of the Chandellas. The shrines of Maniya Devi are simple structures. These shrines can be found at Mahoba and Maniyagadh (Rajgadh) on the left bank of the Ken river. Beglar, a colleague of Major Cunningham, in the nineteenth century, described Maniya Devi as a square off between Parvati and the female deity worshipped by some Gond tribes. A seventeenth-century account also mentions Maniya Devi as the family goddess of the Chandellas, to whom they appealed in times of danger.

The temples built by the Chandella kings are in the Nagara style, mostly affiliated with the brahminical or Hindu religion. The temples built by their ministers or the Jain merchants belong to the Jain Digambara faith. Of the twenty-five temples that exist today, ten have Vishnu enshrined in various forms, such as Vamana, Varaha and a composite Vaikuntha form. Eight temples are dedicated to Shiva, one to Surya, one to the Sixty-four Yoginis and 5 temples belong to the Jain Digambara faith.

More temples were constructed at Khajuraho, many of whose epigraphs and sculptures remain. A large image of Hanuman with a 922 AD inscription suggests the worship of Hanuman too.

Major Cunningham found an image of Buddha in the eastern side of Khajuraho. The image has an inscription belonging to the Buddhist faith "Ye dharma hetu prabhava..." This suggests Buddhism might have been prevalent in Khajuraho, though perhaps on a limited scale. Eleventh century Vajrayana Buddhist images have been found at Mahoba, a town about 65 km from Khajuraho. In the recent excavations at the Bijamandala mound in the southern area of Khajuraho, there are signs of what seems to be a Shiva temple of the early eleventh century. Along with the images of Shiva and Vishnu, some Jain images have also been excavated.

The Jain group of temples, found in the eastern part of Khajuraho, were patronized by the Jain merchants, who belonged to the sect of Digambaras. The temples were dedicated to Tirthankaras Adinatha (Rishabhanatha), Parshvanatha (installed later in 1860), and Shantinatha. A large image of 14 feet in height of Shantinatha has an inscription from AD 1027-28. Several independent donors installed images of Tirthankaras. Several images of Jain Yakshis and Kshetrapalas can also be seen in the temples and also as independent sculptures, which are now kept in museums. A magic square is found on the door of the Parashvanatha temple, in which the numbers are arranged in such a way that their sum, in any direction is always thirty four. Some pillars with images of Jain divinity are found to the south of the Yogini temple.

There is also a popular belief that erroneously associates Khajuraho with the extreme Tantric sect of the Kapalikas. Kapalikas hated Brahmins, and it is believed they had their food in the skulls of the upper-caste Brahmins, and also indulged in sexual rites. The Kapalikas in the literature of the period are portrayed as practicing gruesome rites, such as abducting beautiful girls and sacrificing them. Therefore it does not seem likely that the Kapalikas could be associated with these temples. A leading authority on the history of the Kapalikas, D.N. Lorenzen, also dissociates the Khajuraho temples from the Kapalikas.

Khajuraho was a witness to a stage in Indian history when forces of the orthodox Brahmins rallied themselves against other sects. In the play Prabodhachandrodaya by the Chandella court poet Krishna Mishra, there is a metaphoric rivalry between the virtuous King Viveka (which translates as Wise discrimination) and his opponent King Mahamoha (translates as Great delusion). The other sects such as the Kapalikas, Kshapanakas (Jain), Vajrayana Buddhists, and Charvakas are portrayed as allies of Mahamoha, whereas Vishnu-Bhakti, Sarasvati and Upanishad help King Viveka win his battle against Mahamoha.

A composite of both tantric and puranic elements prevailed in Khajuraho. The puranas, which were earlier opposed the tantric elements, accepted several forms of tantra like the mantras, yantras and mandalas by the tenth century AD. The inscriptions at Khajuraho however, support Brahmins and highly proclaim the three Vedas. The puranas strongly recommend the practice of giving gifts to Brahmins, and building of temples, tanks, and undertaking of charitable works. The inscription dating 999 AD mentions King Dhanga deva performing the Tulapurushadana ceremony, in which he weighed himself against gold and distributed this gold to Brahmins. The performance of fire sacrifices were also glorified in inscriptions. The Chandellas believed they got merits by giving gifts on eclipse days. Satyabama, wife of King Vidyadhara made donations on the days of solar eclipse.

The composite religious practices at Khajuraho are evident in the Lakshmana temple. This temple enshrines the mystical icon of Vaikuntha. Built in AD 954, it was associated with Tantric Vaishnavism of the Kashmir school (Pancharatra). This image was acquired by the Chandella King Yashovarman as a victory token. It had originally come from the Kashmir-Chamba region where the god Vaikuntha was worshipped according to the Pancharatra school of tantric Vaishnavism. One of the grandest temples in Khajuraho, The Kandariya Mahadeva temple, built in about AD 1030, was affiliated to Siddhanta, a moderate Tantric Shaivite order.

Both Vaishnavite and Shaivite tantric orders existed and functioned in parallel, but within the Brahmanic fold. They were not extreme Tantric like the Kapalikas, but showed influences of the Vedic revival and had also drawn from various puranic elements. Both the orders believed in the role of Shakti or Female Energy in the Creation and Dissolution of the universe. The development of various theologies based directly or indirectly on these two tantric orders, led to philosophy and rituals of religious systems. Kings like Dhangadeva and Gahapati Kokkala invited groups of Brahmins, well-versed in the Vedas, to settle near the Shiva temples built by them.

Dancing girls like Mahanachani Padmavati who is mentioned in the Kalanjar inscription, performed and also donated to the temples; The numerous sculptures at the Khajuraho temples depict various architects, their masons, musicians, dancers, traders, which indicate the intense religious and cultural activity that flourished in Khajuraho during the medieval period.