Diwali is believed to have its origin in the 'Rituparva', the harvest festival of early Indian agrarian society, thousands of years ago. With time, several events became related with the celebration of Diwali apart from the returning of Rama and Sita to their kingdom after fourteen years of exile as related in Ramayana. There have been references to the celebration of Diwali in Skand Purana, Padm Purana and Bhavish Purana, each citing different opinions regarding the origin of Diwali. One of the legends presents Diwali as the commemoration of the day when the great King Prithu successfully sought out the means of extracting crops and wealth from the earth, may be referring to the beginning of the art of agriculture and metal extraction from the ores.

The story of lakshmi pooja goes like this. It is believed that when the demons and deities were churning the ocean together to find out the 'drink of immortality', it was on this day that Goddess Lakshmi manifested herself and thus Diwali is celebrated to commemorate the birth of the Goddess of Wealth. Another legend says that on the night prior to the celebration of Diwali, Lord Krishna has killed the demon Narakasura freeing the earth from his terrors and liberating the 16000 princesses that were abducted by him. Thus, on the next day (Diwali), the people illuminated their houses and celebrated to express their joy and relief. Mahabharata mentions the return of Pandavas to their kingdom from their 13-year long exile on this very day. Vikramidtya, the great benevolent king and warrior was believed to be enthroned on Diwali. Whatever the reasons may be, however, Diwali, has always been associated with the worshipping of Lakshmi. One other legend connecting Lakshmi to Diwali is mentioned in Sanatkumar Samhita, which says that it was on this day that Lord Vishnu liberated his consort from the captivity of Bali, the mighty demon-king after a long period.