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}