Did an island actually sink in ancient Greece, due to a volcanic eruption or some other cataclysmic event perhaps?
Was it completely wiped off the map by a tsunami?
Did Plato base his story on fact or is it a work of fiction?
We don't know. The only sources for the story are Plato's dialogues Timaeus and Critias, for all we know the story of Atlantis is a completely fictitious product.
That said, any of the following historical catastrophes may have been an inspiration for Atlantis:
Thera (partially) sunk as a result of the eruption, which also produced a tsunami that devastated Minoan Crete and reached as far as Egypt.
The city was completely submerged by an earthquake or its subsequent tsunami in 373 BC, about a decade before Plato wrote Timaeus and Critias.
The city was completely submerged by an earthquake sometime around 1000 BC.
In John Hale's "Lords of the Sea: The Epic Story of the Athenian Navy and the Birth of Democracy", he argues that Atlantis was a thinly-veiled allegory for Athens itself and the collapse of their power after over-stretching themselves militarily. It's rather like "Gulliver's Travels" in that the political issues involved are obscured to us, but would have been glaringly obvious when it was written.
Plato describes Atlantis as
Three rings of water with two rings of land surrounded the city center. The water rings were connected with canals and a 5-mile canal connected to the ocean. On the land rings were houses, various civic buildings, gardens, and other structures. The diameter of the entire city was only 2-miles. Surrounding the center city was a huge plain and a large mountainous area. Much of this land was of a rural nature with grazing animals.
Santorini would be a good match for this as it did have the required structure prior to c1645BC and it was also suject to a massive volcanic eruption probably somewhere between 1627BC and 1600BC which significantly changed the shape of the island and would have destroyed any civilisation based there.
Against this, Plato also said that Atlantis was "outside the Pillars of Heracles" (which are usually interpreted as being the Straits of Gibraltar) and that it was "an island greater in extent than Libya and Asia". Such constraints would put it somewhere in the Atlantic Ocean, however there is no sign of any large sunken island there.
Possibly the events in Syracuse were part of Plato's inspiration, cf. Gunnar Rudberg: Atlantis and Syracuse. - Yet possibly Plato talked of Atlantis as a real place, as some academics point out. Academic approaches towardas Plato's Atlantis as a real place can be found here: Atlantis-Scout
According to Graham Hancock, who has been doing a lot of research for a long time on megaliths and ancient cultures, there has been recent evidence of a gigantic cataclysm around 12500 years ago from multiple large fragments of a 200km Comet. Apparently, the evidence, in the form of nanodiamonds, widespread flood across North America, mass extinctions had been brought to light by about 30 specialists of one sort or another but is kind of buried in various papers.
He has been searching for a very long time for evidence of a global culture that he believes was responsible for megaliths in South America, Egypt, Turkey and which was flourishing before this huge event. He looks for evidence of cities in areas hundreds of metres below current sea level, which were flooded by the global flood around 12,000 years ago.
The comet hit the 2km thick ice sheet, producing massive heating and flooding, then that was followed by a worse ice age before this period ended. According to him, this period matches exactly the time that Plato was talking about. A talk containing details of his book to come where he describes some of this is at https://www.youtube.com/watch?v=75j5CP0vtsI