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:
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Thera (partially) sunk as a result of the eruption, which also produced a tsunami that devastated Minoan Crete and reached as far as Egypt.
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The city was completely submerged by an earthquake or its subsequent tsunami in 373 BC.
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The city was completely submerged by an earthquake sometime around 1000 BC.