Hadoop has configuration parameter hadoop.tmp.dir which, as per documentation, is `"A base for other temporary directories." I presume, this path refers to local file system.

I set this value to /mnt/hadoop-tmp/hadoop-${user.name}. After formatting the namenode and starting all services, I see exactly same path created on HDFS.

Does this mean, hadoop.tmp.dir refers to temporary location on HDFS?

It's confusing, but hadoop.tmp.dir is used as the base for temporary directories locally, and also in HDFS. The document isn't great, but mapred.system.dir is set by default to "${hadoop.tmp.dir}/mapred/system", and this defines the Path on the HDFS where where the Map/Reduce framework stores system files.

If you want these to not be tied together, you can edit your mapred-site.xml such that the definition of mapred.system.dir is something that's not tied to ${hadoop.tmp.dir}

Let me add a bit more to kkrugler's answer:

There're three HDFS properties which contain hadoop.tmp.dir in their values

This is why you saw the /mnt/hadoop-tmp/hadoop-${user.name} in your HDFS after formatting namenode.

Had a look around for information on this one. Only thing I could come up with was this post on the Amazon Elastic MapReduce Dev Guide:

In hadoop-site.xml, we set hadoop.tmp.dir to /mnt/var/lib/hadoop/tmp. /mnt is where we mount the “extra” EC2 volumes, which can contain a lot more data than the default volume. (The exact amount depends on instance type.) Hadoop's RunJar.java (the module that unpacks the input JARs) interprets hadoop.tmp.dir as a Hadoop file system path rather than a local path, so it writes to the path in HDFS instead of a local path. HDFS is mounted under /mnt (specifically /mnt/var/lib/hadoop/dfs/. So, you can write lots of data to it.