Indraprastha is one of the most holy places in the geography of the Purāṇas. It lies on the bank of the Yamunā, at the Khāṇḍavana forest. Bhagavān Vishṇu himself founded it and gave it its name. Indra had been restored to the throne of svarga after Nṛsiṃha killed Hiraṇyakaśipu, and he performed yajñas at this place to please Bhagavān Vishṇu. Bhagavān Vishṇu named the place Indraprastha. He then ordered Brahmā, Bhagavān Śiva, the Saptaṛshis and Bṛhaspati to set up within it copies of all the great holy places: Prayāga, Kāśī, Śivakāñchī, Gokarna, Dvārakā, Kośala, Madhvāraṇya, Badarīkāśrama, Haridvāra, Pushkara and others. One who dies at Indraprastha is not born again. The Padma Mahā Purāṇa tells this in the Uttara Khaṇḍa, Chapters 199–200.

The founding

Indra won back his kingdom after Nṛsiṃha killed Hiraṇyakaśipu. He wished to honour Bhagavān Vishṇu with yajñas in thanks. Bṛhaspati sent him to the Khāṇḍavana forest on the bank of the Yamunā. Bhagavān Vishṇu came to this yajña with Brahmā and Bhagavān Śiva. He was pleased with Indra’s pure devotion, which wanted nothing in return, and he spoke these words of founding: “This place will be called Indraprastha.” Then he ordered that all the great holy places be set up within it. The Padma Mahā Purāṇa tells this in the Uttara Khaṇḍa, Chapters 199–200.

The consecration of all holy places

At the command of Bhagavān Vishṇu:

Brahmā brought Sarasvatī and Gaṅgā and founded Prayāga here.
Bhagavān Śiva set up Kāśī, Śivakāñchī and Gokarna here, and said that he would always live here with Gaurī.
The sons of Brahmā, the Saptaṛshis, who were learned in knowledge, made seven holy places by the power of their tapas.
Bṛhaspati set up Nigamodbodhaka, where knowledge of the Vedas arises even without study.
Bhagavān Vishṇu himself founded Dvārakā, Kośala, Madhvāraṇya, Badarīkāśrama, Haridvāra and Pushkara within Indraprastha.
All the holy places of Naimisha, the Kālañjara mountain and the bank of the Sarasvatī were moved here.

So Indraprastha became the highest gathering of all sacred places. The Padma Mahā Purāṇa tells this in the Uttara Khaṇḍa, Chapter 200.

The brāhmaṇas’ blessing and Indra’s rebirth

Indra gave the brāhmaṇas gifts of prasthas of jewels (a prastha is a measure). They blessed him: “You performed a hundred yajñas here with desire and won the rank of a deva. Now you have worshipped Bhagavān Vishṇu without desire. You will fall from your place, but you will be born as the best of brāhmaṇas. In that birth you will remember your yajñas, leave your house, and come back to Śakratīrtha. You will give up your body here as a saṃnyāsin and reach the place of Bhagavān Vishṇu.”

This came true. Indra was born as Vishṇuśarman, the son of the brāhmaṇa Śivaśarman at Hastināpura. As a young man he left his house and came to Indraprastha with his father. He knew the site of his former yajñas by memory and gave up his body there. Both he and his father reached the place of Bhagavān Vishṇu. The Padma Mahā Purāṇa tells this in the Uttara Khaṇḍa, Chapter 200.

The Bhilla and the lion

In Chapter 200 a hunter (a Bhilla) and a lion killed each other in a fight at Indraprastha. They died violent deaths, one a hunter and the other a beast of prey. Yet the holiness of dying at Indraprastha was enough to take both to Vaikuṇṭha. Vimānas (divine vehicles) came for both of them.

Mahātmya

One who dies at Indraprastha is not born again. By the declaration of Bhagavān Vishṇu, Prayāga, Kāśī and all the other great holy places are present within it. This makes the whole place a single vessel of all the puṇya (merit) on earth. The Padma Mahā Purāṇa tells this in the Uttara Khaṇḍa, Chapters 199–200.

Ādi Parva: the Pāṇḍava capital

In the Mahābhārata the same place was called Khāṇḍavaprastha before the Pāṇḍavas built on it. Dhṛtarāshṭra gave it to the Pāṇḍavas after they returned to Hastināpura following the svayaṃvara of Draupadī. Yudhishṭhira and his brothers went there with Kṛshṇa and set up their kingdom. The empty forest land became a great city, Indraprastha, shining on the bank of the Yamunā.

Agni burned the nearby Khāṇḍava forest, with help from Kṛshṇa and Arjuna, and this cleared the land further. It led to the building of the famous Maya Sabhā. The dānava builder Maya made this assembly hall in thanks for Arjuna’s protection. It was built with dānava māyā and divine materials. It became the throne hall of the Pāṇḍavas and later the place of the dice game.

The Pāṇḍavas lived at Indraprastha through their years of prosperity. Draupadī ran the household. Subhadrā came after her marriage to Arjuna. Abhimanyu was born here. Arjuna left from Indraprastha for his twelve years of vanavāsa (forest exile) and came back to it. The kingdom ended with the dice game that followed the completion of the Maya Sabhā. The Mahābhārata tells this in the Ādi Parva.

Mausala Parva: refuge of the Yādava survivors

The Yādavas were destroyed at Prabhāsa, and the sea swallowed Dvārakā. Arjuna then led the rest of the clan to Indraprastha as a refuge. He had taken the widows, elders and children away from the drowning city. At Indraprastha he settled the surviving old men, boys and women, and he crowned Vajra as their king. Vajra was the great-grandson of Kṛshṇa through Aniruddha. The people of Dvārakā who had followed Arjuna were settled near Vajra according to their rank. The people of Kṛtavarmā were settled at Mārtikāvata, and the descendants of Sātyaki were settled on the bank of the Sarasvatī. In this way the line of Kṛshṇa lived on at Indraprastha after the end of the Yādavas. The Mahābhārata tells this in the Mausala Parva, Chapter 7.

Sources

Padma Mahā Purāṇa, Uttara Khaṇḍa, Chapters 199–200
Mahābhārata, Ādi Parva
Mahābhārata, Mausala Parva, Chapter 7