Researchers have found evidence that Geoffrey of Monmouth's 'The History of the Kings of Britain' was written at St George's chapel, before it was demolished to make way for Oxford Castle.
Deeds from the time have revealed the Welsh scholar was serving canon there when writing the chronicle in 1136, BBC News reported.
Charters and deeds dating from 1129 to 1151 signed by Geoffrey and countersigned by the Archdeacon of Oxford were analysed by experts.
The chapel was a teaching base for Oxford students, and Geoffrey indicates in the paperwork his profession as a "magister" meaning teacher.
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"He would have been based there when he wrote his famous Latin chronicle, Historia Regum Britanniae," she said.
"It was Geoffrey who introduced the figures of King Arthur and Merlin to a wide medieval readership and paved the way for the enormous popularity of the Arthurian legends in later centuries, right up to modern times," she added.
The mythical figure of Arthur as a 5th Century military commander, leading the Britons into battle against the invading Saxons, has proved impossible for historians to verify.
It told of Guinevere, Merlin, the sword Caliburn - later known as Excalibur - and Arthur's final resting place in Avalon.
All that is left of the building where Geoffrey is thought to have written The History of the Kings of Britain is the Saxon stone-built St George's Tower and the ancient crypt.
"[He] would have walked the footprint of the crypt whilst penning his notable tome," a castle spokesman said.
"[It] has played a role in a number of key historical events in British history. We are so excited to have discovered that it is also the site where the legends of King Arthur were written," Michael Speight, general manager of Oxford Castle Unlocked, said.