When sages asked Brahma how and where they could worship God in Kali Yuga, Lord Brahma told them to meet Prahlada, explained M.V. Anantapadmanabhachariar, in a discourse. The latter told them that there was a place which was sacred, for it was here that the river Gomathi merged into the sea, and this was the proper place for worship. That place was the city of Dwaraka.
Jarasandha was Kamsa’s father in law. When Krishna killed Kamsa, Jarasandha, angered that his daughters had been widowed by Krishna, gathered a huge army and fought with Balarama and Krishna. Kalayavana, son of the sage Garga, laid siege to Mathura. To protect the Yadavas from enemies like Jarasandha and Kalayavana, Lord Krishna asked the ocean to carve out some land for Him, and the ocean created an island. Here Krishna had a palace built, and by His powers transferred all the Yadavas safely to this island. That was Dwaraka, and it was a captivating sight to behold.
Kalayavana went into a cave in pursuit of Lord Krishna, who had entered the cave. Kalayavana woke up the sleeping Muchukunda, thinking it was Krishna. Anyone who woke up Muchukunda was doomed to be burnt to ashes and so Kalayavana ended up being burnt. Muchukunda worshipped Krishna, who said Muchukunda would reach Him in his next birth. Muchukunda retired to Badri to do penance.
It was when Krishna was in Dwaraka that his childhood friend Kuchela went to meet Him. Kuchela could offer the Lord only rice flakes, but the Lord accepted the offer gladly, thus demonstrating His simplicity. When Draupadi cried out to Krishna to save her from being shamed in the court of the Kauravas, Lord Krishna was in Dwaraka, and He sent her yards and yards of dress right from where He was! It was while He was in Dwaraka that Arjuna approached Him and sought His help in the war.
Once a sanyasi broke his vows and was cursed to become a demon. One day, the demon met a pilgrim who was returning from Dwaraka. The pilgrim narrated the greatness of Dwaraka, and as a result of listening to this, the sage was released from his curse. Worshipping in sacred Dwaraka will get rid of our sins.