There are several popular and interesting legends related to the joyous festival of Diwali. One may notice that the legends of Diwali differ in different parts of the country and so does the reasons for Diwali celebration. But everywhere Diwali symbolizes the victory of good over evil.

Legend of Lord Ram
According to a popular legend in North India, Diwali marks the day when Lord Ram - the revered Hindu God, was crowned as the King of Ayodhya. Ram returned to Ayodhya after 14 years of exile with wife Sita, brother Laxman and devotee Hanuman. The exile was pronounced on Ram by father Dashrath on the persistence of queen Kaikayi. During the period of exile Ram performed many good deeds for the benefit of mankind and also slayed the demon Kind Ravana who abducted Sita.

When Lord Ram returned to Ayodhya everybody in the Kingdom was happy. To express their joy and jubilation people decorated their houses with flowers and garlands. They also lighted diyas and burnt crackers to mark the victory of good over evil. This tradition of lighting diyas and bursting crackers is being carried out since then on the occasion of Diwali.

Legend of King Bali and Lord Vishnu
The famous legend of Diwali from South India narrates the story of King Bali and Lord Vishnu. The legend goes that Gods were feeling threatened looking at the increasing popularity of King Bali. To check his growing reign, Lord Vishnu appeared in the Vamana (dwarf) avatar and requested King Bali for as much land as could be covered by his three steps. Known for his generosity, King Bali agreed to this seemingly trivial request. But to the surprise of all present, Vamana increased in cosmic proportions and with his first step he covered all the heaven and with the second he covered the earth. Then he asked Bali for a space to keep his third step. Realizing that Vamana was Lord himself. Bali bowed down and offered his head to place the third step. With his third step Lord Vishnu pushed Bali to Patalalok or the nether world. But looking at his good behavior, Lord Vishnu gave Bali the lamp of knowledge. He also allowed him to visit earth once in a year to light millions of lamps in order to dispel darkness of ignorance and spread the power of light and knowledge.

Legend of Goddess Lakshmi
Legend goes that Goddess Lakshmi - the Hindu mythological Goddess of Wealth, was incarnated on amavasya or the no moon day in the Hindu month of Kartik (October-November). This explains why people perform Lakshmi Puja on the day of Diwali.

It is believed that Goddess Lakshmi was incarnated during the famous Samudra-Manthan (churning of ocean) process that was carried out by devas (Gods) and aruras (demons) for the sake of Amrit or the nectar of immortality. Goddess Lakshmi gave the amrit to Gods.

Some, however, believe that on the day of Diwali, Lord Vishnu in his fifth incarnation as Vamana rescued her consort Goddess Lakshmi from the clutches of demon King Bali. And, this is why people worship Goddess Lakshmi on Diwali Festival.

Legend of Lord Krishna and Narakasura
This legend says that once a demon called Narakasur had become extremely powerful by acquiring a boon from Lord Brahma after severe penance. Being immensely powerful, Narakasura began to torture and terrorize people. Unable to bear their plight, God’s requested Lord Krishna to put an end to Narkasura’s tyranny.

It is said that on a day preceding Diwali, Lord Krishna defeated and killed Narkasura in a bloody battle with the help of Bhudevi - Narkasura’s mother. As a symbol of victory, Krishna smeared demon’s blood on his forehead and return home early morning on the day of Narakachaturdashi. Womenfolk massaged scented oil on Krishna’s body and gave him a bath to wash away demon’s blood. Since then the custom of taking bath on Diwali is being carried out in Maharashtra and several states in South India.

Narkasura’s death was celebrated as a victory festival for two continuous days including the Diwali Day. As Narkasura was killed by his own mother message of Naraka Chaturdashi Parva is that good of the society should always prevail over one's own personal bonds.

Legend of Pandavas
According to the great Hindu epic 'Mahabharata' it was on the day of Diwali or the 'Kartik Amavashya' when Pandavas appeared after 12 years of banishment. The Pandavas went into banishment after they lost the game of dice (gambling) in the hands of their cousins’ Kauravas. Pandavas return was celebrated by their subjects who loved and revered them by lighting diyas and holding joyous celebrations.