The legend has it that Georgy II, Grand Prince of Vladimir, first built the town of Maly Kitezh (Little Kitezh) on the Volga River (today's Krasny Kholm). It is sometimes erroneously identified with Gorodets, which was actually founded some 30 years before Georgy's birth in 1189. Later on, the prince crossed the rivers of Uzola, Sanda, and Kerzhenets and found a beautiful spot on the shores of the Svetloyar Lake, where he decided to build the town of Bolshoy Kitezh (Big Kitezh). According to folk etymology, the name of the town came from the royal residence of Kideksha (near Suzdal), ransacked by the Mongols in 1237, while Max Vasmer labels the place-name as "obscure".
After having conquered some of the Russian lands, Batu Khan heard of Kitezh and ordered his army to advance towards it. The Mongols soon captured Maly Kitezh, forcing Georgy to retreat into the woods towards Bolshoy Kitezh. One of the prisoners told the Mongols about some secret paths to the Lake Svetloyar. The army of the Horde followed Georgy and soon reached the walls of the town. To the surprise of the Mongols, the town had no fortifications whatsoever. Its citizens didn't even intend to defend themselves and were engaged in fervent praying, asking God for their redemption. On seeing this, the Mongols rushed to the attack, but then stopped. Suddenly, they saw countless fountains of water bursting from under the ground all around them. The attackers fell back and watched the town submerge into the lake. The last thing they saw was a glaring dome of a cathedral with a cross on top of it. Soon, there were only waves.
This legend gave birth to numerous incredible rumors, which have survived to this day. It is said that only those who are pure in their heart and soul will find their way to Kitezh (ironically, the road to the lake is still called "Батыева тропа", or the Path of Batu). It is also said that in calm weather one can sometimes hear the wailing sound of chiming bells and people singing from under the waters of the Lake Svetloyar. Some people say that the most pious individuals may actually see the lights of religious processions (called "крестный ход") and even buildings on the bottom of the lake. This is why the Lake Svetloyar is sometimes called the "Russian Atlantis".