The word for "spring" in the language of Kashmir is naga, and nagas are considered its earliest inhabitants.  In a sense this is borne out by geology since that valley was once "a vast span of water, similar to a huge dam, walled in by high mountains. The Nilamatapurana records how the valley was elevated out of water and left under the care of the Nagas, of whom Nila, the son of Kashyapa, was the chief."  Kashmir is named after Kashyapa where "the term ‘naga’ stands for spring; 'chesmah,' and 'negin' for small spring.  Springs are the main source of water in Kashmir."  And "the auspicious and famous river of Kashmir, the Vitasta (Jhelum) originates from a spring near Verinag and is responsible for the water supply to most parts of the valley.  The religious significance of the river is established by the Nilamatapurana when it records the entire land of Kashmir as the material manifestation of Uma and describes her as the divine form of the Vitasta."

"A large number of temples were built near springs and were dedicated to the worship of nagas."  and " These places have become great centres of religious pilgrimage. The place names of certain areas, e.g. Verinag, Anantnag and Seshanag even today remind one of the intimate relations between the valley and the popularity of the Naga cult.  The Rajatarangini of Kalhana mentions Sushravas and Padma Nagas, who were tutelary deities connected with the Wular lake. The Dikpalas of Kashmir are believed to be four nagas, viz. Bindusara in the east, Srimadaka in the south, Elapatra in the west and Uttarmansa in the north."

According to the Vinaya or Monastic Rule, an animal cannot become a monk.   At one time, a Naga was so desirous of entering the Order that he assumed human form in order to be ordained. " Shortly after, when asleep in his hut, the naga returned to the shape of a huge snake. The monk who shared the hut was somewhat alarmed when he woke up to see a great snake sleeping next to him! The Lord Buddha summoned the naga and told him he may not remain as a monk, at which the utterly disconsolate snake began to weep. The snake was given the Five Precepts as the means to attaining a human existence in his next life when he can then be a monk. Then out of compassion for the sad snake, the Lord Buddha said that from then on all candidates for the monkhood be called 'Naga' as a consolation. They are still called 'Naga' to this day." 

In the 17th century, Tibet's Fifth Dalai Lama was inspired to have constructed a small temple on a lake behind the Potala palace n Lhasa dedicated to [kLu] or lu.  This is called the Lhukang . On its walls are depictions of tantric practices, and images of the 84 Mahasiddhas as nagas are associated with yogic accomplishment.  (Even today, the group of naked and most physically disciplined Indian yogis are known as the nagas.)   These excerpts were taken from the site http://www.khandro.net . Be sure to visit here for a wealth of Dharma Information, teachings and Tibetan Links.