The Great Schism of Pangea

In a time hundreds of thousands of years ago if not more, there was a great global battle fought on Earth. At the time of the single continent known as Pangea, there was Dragons and Giants that regularly walked the Earth. They had devastated themselves fighting to control Earth. This had caused magic to seep deep into the planet, and caused untold damage to it. After a while, the magic started to change and other intelligent creatures started to appear, beings like the Yuan-Ti. Others over time like the Loxodons & the Vedalken soon followed in time. Portals were also ripped open to other planes and worlds, allowing travel between these different dimensions. All the while many of the newer races started to wage war too, and split into different city states. Regions & cities like Lemuria, Mu, Atlantis, and Hyperborea sprang up, each controlled by one group or the other, and became places of learning and magic. Each were defended by powerful armies and led by powerful magic users of all types. Many of these mages & clerics learned many secrets of the Dragons & Giants, and marched to war.
At the same time many species either departed to other worlds, or others came through. The Elves, Goblinoids, Orcs, and Gnomes were just a few that crossed over. Eventually Lizardmen rose in many regions, as did Halflings later still. All were affected to some degree of magical energy. Many took sides during this conflict, and many more died. With the influx of magic from before, ancient evils started to awaken, elder monsters from the dawn of time, that remembered the Dragons. Both of these primordial groups hated each other since the dawn of space & time, and would do anything to destroy each other. Soon many of the Dragons & Elder Evils were forced to take sides with the mortals, so they may live. At this time, another city state was meant to have been mentioned by all, cursed as a place of abomination, and the most diabolical ancient of all states on Earth. It's name in the old tongues is R'leyha, and all but forgotten in modern times.
The world started to change, with Pangea split with the movement of the tectonic plates. This was partly affected by the build up of magic under the crust, and partly the natural order. Sadly, a war like no other hastened it further. The warring city states used horrific magic against each other driving Lemuria, Mu, Atlantis, and R'leyha below the seas. Hyperborea was nearly destroyed and buried below the Arctic Sea. Most are now lost or out of reach by many living beings, yet rumours persist of them, and many legends. Some mages, clerics, and madmen still talk & babble about the inhabitants of these lands.
As for the war itself, great amounts of magical energies, and spiritual energies, collided. Thousands upon thousands were killed yearly over the course of a few years. Eventually all sides started to rely on a strong arm, and numbers of fighters grew to prominence. Many powerful spellcasters & religious leaders led initially, bur as their numbers dwindled, they removed themselves from the front lines of the war, and started to teach others their ways. By doing this, many schools of magic and early modern proto-religious ideas were created. The gods that survived the wars were fed by many converts, growing stronger. Magic energy suffered though. It was drained enough less peoples have been able to tap into now, though a good few are still born with the ability or the mental strength to still wield it to this day. Many of the races that fought started to withdraw to lands where they were able to survive, and carry out raids and similar attacks on their foes. Less all out battles took place due to the decreased numbers, and the eventual breakup of Pangea. Nearly all the major cities of the city states were swallowed by the oceans, leaving behind others on the continents.
A good number of the spellcasters survived, along with the clerics, and established outposts where the magic schools &  cults started to flourish. At the same time, the Dragons & Giants suffered the worst, having lost great numbers during the previous war. The Elder Evils started to hide, building up strength again, partly since many were too alien in mind & body to have a direct effect on the remaining races. They knew that more life would come and they are infinitely patient.
At the same time, new species were starting to flourish after extinction events scarred the Earth, and eventually one group would emerge to affect the balance of power. These were the early Hominids and they would in their own way start to affect the way forward. By this stage many of the older races started to withdraw from sight or to other Planes & Material Worlds, disillusioned & bloodied. The magics that were used had started to change too. Much of it had been lost, though what has remained is still potent enough to potentially affect the world once again. Many of the old Portals are now destroyed, or hidden away, whether accidentally or deliberate. For the latter it was done to prevent the remaining races from getting potential allies, and magical items.
Many deities saw the potential when called upon during the war and started to take an active interest in Earth. After time, many would continue to gain followers and to grow stronger. After the hominids rose to prominence and spread across the world, many of these same deities & cults sprang up amidst their communities too. Given time, any new religions starting up found it hard to get a foothold on Earth due to the dominance of 'The Old Ways', and they have to work together to get ahead.

Spread

The myth is spread all over the world, with minute details known in different regions. Many of the older races barely know anything about it, though they have records buried deep in old records, or carved into stone or wood tucked away. Only a few know the extent of what happened, and the majority only know of the most well-known parts.