The origins of the legend go back to around 1535, when Diego de Almagro left Cuzco in Peru to attempt to the conquest of Chile. He was accompanied by 550 Spaniards and some 10,000 Peruvian indians. Among these were two men of high rank; Paullo Tupac and Huillac Huma. The former was a prince of the royal Inca family and the latter the last High Priest of the extinguished cult of the Sun God. They were held by the Spanish as hostages for the State. It was their responsibility to keep order among the indians who made up the bulk of the expedition, and if they failed to do so they would be killed in retribution for the disorder. High Priest Huillac Huma was accompanied by his daughter Nusta, in whose veins ran the blood of the Incas. When the expedition reached Atacama, he decided to seize the opportunity to escape. His daughter Nusta remained with a group of natives who were also planning to slip away. When she in turn fled, the group took refuge in a forest of tamarugo trees, in the area now known as Pampa del Tamarugal.

The Inca princess lived there for four years, surrounded by her servants. She directed and organized them and became known as the Tirana del Tamarugal - the "Tyrant of the Tamarugo Forest". One day a handsome, haughty Spaniard was brought before the princess, Vasco de Almeyda, one of a group of prospectors settled in Huantajaya who were searching for the mythical "Mine of the Sun". No sooner had the princess set eyes on this foreigner than she fell in love with him. The elders and other men of the tribe condemned the Spaniard to death to save her from herself, but the impassioned young woman sought for ways to break with tradition and save her beloved from his fate. She consulted the stars in accordance with traditional beliefs and informed her people that the execution could not take place until after the fourth full moon.

During the period from then until the execution the lovers managed to meet and maintain a secret relationship in which they could express their love. She begged her lover to convert her to the Catholic faith so that when she died her soul would not perish, just as the Christians promised. At the very moment when he was baptising her as a Christian soul, a cloud of arrows interrupted the ceremony. The native people who lived in the area, and who were maintaining a watch on her, could not tolerate such a betrayal. The couple fell, mortally wounded.  With an effort Nusta raised her dying body, called to her people – the people of La Tirana del Tamarugal – and said: "I die content, I die happy, sure as I am in my faith in Jesus Christ, that my immortal soul... will ascend into Glory and reach the throne of God, together with that of my beloved, and that we shall be together for all eternity. I only beg you, when I am dead, to bury me beside my beloved and raise a cross over my grave".

It was in the 1940s that Fray Antonio Rodón, responsible for evangelizing the area of Tarapacá and Pica, arrived at the Tamarugal to raise the standard of Christ. One day he saw a rainbow on the horizon and he followed it to the forest of Tamarugos. When he arrived at the forest he found a Christian cross. On finding the cross the priest heard a voice from heaven which told him about the Inca princess Nusta, and he built a hermitage on the spot. This was later enlarged to a church in honour of the Virgen del Carmen, in memory of Nusta's self-sacrifice for Vasco de Almeyda.