This story of Parashurama was narrated by Rishi Lomasha to Yudhishthira during the latter's pilgrimage (Mahabharata, Vana Parva, Tirthayatra Parva)

Parashurama

There was a great ruler of the Haihaya clan. He was endued with a thousand arms; and by the favour of Dattatreya he likewise had a celestial car made of gold. His rule extended over the entire animated world, wheresoever located on this earth. The car of that mighty monarch could proceed everywhere in an unobstructed course. Grown resistless by the virtue of a granted boon, he ever mounted on that car, trampled upon gods, Yakshas and saints on all sides round. All the born beings wheresoever placed, were harassed by him.

Then the celestials and the saints of a rigidly virtuous life, met together, and thus spoke to Vishnu, the god of gods, the slayer of demons, and possessed of prowess that never failed, saying, “O blessed and revered lord! For the purpose of preserving all the born beings, it is necessary that Arjuna should be killed by you.”  The mighty ruler of the Haihaya clan placing himself on his celestial car, affronted Indra, while that deity was enjoying himself with Shachi, his queen. Then, Vishhnu held a consultation with Indra, with a view to destroying Kartavirya's son. On that occasion, all that was for the good of the world of beings, was communicated by the lord of gods; and the blessed god worshipped by the world, to do all that was necessary, went to the delightful Badari wood which was his own chosen retreat for practising penances.

At this very time there lived on the earth a mighty monarch in the land of Kanyakubja, a sovereign whose military force was exceedingly great. His name of Gadhi was famous in the world. He, however, betook himself to a forest-life. While he was dwelling in the midst of the wood, there was born to him a daughter beautiful as a nymph of heaven. Richika, the son of Bhrigu, asked for her to be united with himself in marriage. Then Gadhi spoke to that Brahmana, who led a rigidly austere life, saying, “There is a certain family custom in our clan; it has been founded by my ancestors of a bygone age. Be it known to you that the intending bridegroom must offer a dowry consisting of a thousand fleet steeds, whose colour must be brown and every one of whom must possess a single sable car. But, a reverend saint like you cannot be asked to offer the same. Nor can my daughter be refused to a magnanimous saint of your exalted rank.”

Thereupon Richika said, “I will give you a thousand fleet steeds, brown in hue and possessing a single black ear; let your daughter be given in marriage to me.”

Thus having given his word, he went and said to Varuna, “Give me a thousand fleet steeds brown in colour, and each with one black ear. I want the same as dowry for my marriage.” To him Varuna forthwith gave a thousand steeds. Those steeds had issued out of the river Ganga; hence the spot has been named, the horse's landing place. In the city of Kanyakubja, the daughter of Gadhi, Satyavati by name, was given in marriage; and the gods themselves were of the party of the bride. Richika, thus procured a thousand steeds, and had a sight of the dwellers of heaven and won a wife in the proper form. He enjoyed himself with the girl of slender waist, and thus gratified all the wishes and desire that he ever had.

When the marriage had been celebrated, his father Bhrigu came on a visit to see him and his wife; and he was glad to see his praiseworthy son. The husband and wife together paid their best respects to him, who was worshipped by all the gods. When he had seated himself, they both with joined palms, stood near him, in order that they might to his bidding. Then Bhrigu, glad at heart, thus spoke to his daughter-in-law, saying, “O lovely daughter! As for a boon I am ready to grant you any object of your wish.” Thereupon she asked for his favour in this, that a son might be born to both herself and her mother. He vouchsafed the favour thus asked for.

Bhrigu said, “During the days that your season lasts, you and your mother must take a bath, with the ceremony for bringing forth a male child. You two must then separately embrace two different trees, she a peepal tree, and you a fig tree. Here are two pots of rice and milk, prepared by me with the utmost care. I having ransacked the whole universe to find the drugs, the essence whereof has been blended with this milk and rice. It must be taken as food with the greatest care.” Saying this, he vanished from sight.

The two ladies, however, made an interchange both in the matter of the pots of rice, and likewise as regards the trees. Then after the lapse of very many days, the revered saint, once more came. He came knowing what had happened by his attribute of divine knowledge. Then Bhrigu spoke to Satyavati, his daughter-in-law, saying, “O dutiful girl! The wrong pot of rice you took as food. It was the wrong tree which was embraced by you. It was your mother who deluded you. A son will be born of you, who, though of the priestly caste, will be of a character fit for the military order; while a mighty son will be born of your mother, who, though by birth a Kshatriya will assume a life suitable to the Brahmana order. His power will be great, and he will walk on the path trodden by righteous men.”

Then she entreated her father-in-law again and again, saying, “Let not my son be of this character; but let my grandson be such.” Bhrigu replied, “So let it be!” Thus he was pleased to grant her prayer. Then she brought forth on the expected day a son by name Jamadagni. This son of Bhrigu was endowed with both splendour and grace. He grew in years and in strength, and excelled the other saints in the proficiency of his Vaidik lore. To him, came spontaneously and without instruction the knowledge of the entire military are and of the fourfold missile arms.

Jamadagni devoted himself to the study of the Veda and the practice of sacred penances, and became famous for his great austerities. Then he pursued a methodical course of study and obtained a mastery over the entire Veda. He paid a visit to Prasenajit and solicited the hand of Renuka in marriage. This prayer was granted by the king. Jamadagni having thus obtained Renuka for his wife, took his residence with her in a hermitage, and began to practice penances, being assisted by her. Four boys were born of her, with Rama for the fifth. Although the youngest, Rama was superior to all in merit.

Now once, when her sons had gone out for the purpose of gathering fruits, Renuka who had a pure and austere life, went out to bathe. While returning home, she happened to cast her glance towards the king of Martikavata, known by the name of Chitraratha. The king was in the water with his wives, and wearing on his breast a lotus wreath, was engaged in sport. Beholding his magnificent form, Renuka was inspired with desire. This unlawful desire she could not control, but became polluted within the water, and came back to the hermitage frightened at heart. Her husband readily perceived what state she was in. Mighty, powerful and of a wrathful turn of mind, when he beheld that she had been giddy and that the lustre of chastity had abandoned her, he reproached her by crying out “Fie!” At that very moment came in the eldest of Jamadagni's sons, Rumanvan; and then, Sushena, and then, Vasu, and likewise, Vishvavasu. The mighty saint directed them all one by one to put an end to the life of their mother. They, however, were quite confounded and lost heart. They could not utter a single word. Then he in ire cursed them. On being cursed they lost their sense and suddenly became like inanimate objects, and comparable in conduct to beasts and birds. Then Rama came to the hermitage, last of all. Him the mighty-armed Jamadagni, of great austerities, addressed, saying, “Kill this wicked mother of yours, without compunction, O my son!” Thereupon Rama immediately took up an axe and therewith severed his mother's head.

Then, the wrath of Jamadagni of mighty soul, was at once appeased; and well-pleased, he spoke the following words, “You have, my boy! performed at my bidding this difficult task, being versed in virtue. Therefore, whatsoever wishes there may be in your heart, I am ready to grant them all. Do you ask me.” Thereupon Rama solicited that his mother might be restored to life, and that he might not be haunted by the remembrance of this cruel deed and that he might not be affected by any sin, and that his brothers might recover their former state, and that he might be unrivalled on the field of battle, and that he might obtain long life. Jamadagni, whose penances were the most rigid, granted all those desires of his son.

Once, however, when his sons had gone out as before, the valourous son of Kartavirya, Arjuna, came up to the hermitage. When he arrived at that hermitage, the wife of the saint received him hospitably. He, however, intoxicated with a warrior's pride, was not at all pleased with the reception accorded to him, and by force and in defiance of all resistance, seized and carried off from that hermitage the chief of the cows whose milk supplied the sacred butter, not heeding the loud lowing of the cow. He wantonly pulled down the large trees of the wood. When Rama came home, his father himself told him all that had happened. Then when Rama saw how the cow was lowing for its calf, resentment arose in his heart. He rushed towards Kartavirya's son, whose last moments had drawn nigh. Then the descendant of Bhrigu, the exterminator of hostile heroes, put forth his valour on the field of battle, and with sharpened arrows with flattened tips, which were shot from a beautiful bow, cut down Arjuna's arms, which numbered a thousand, and were massive like wooden bolts for barring the door. He, already touched by the hand of death, was overpowered by Rama, his foe.

Then the kinsmen of Arjuna, their wrath excited against Rama, rushed at Jamadagni in his hermitage, while Rama was away. They slew him there; for although his strength was great, yet being at the time engaged in penances, he would not fight. While thus attacked by his foes, he repeatedly shouted the name of Rama in a helpless and piteous way. The sons of Kartavirya shot Jamadagni, with their arrows, and having thus chastised their foe, went their way. When they had gone away, and when Jamadagni had breathed his last, Rama returned to the hermitage, bearing in his arms, fuel for religious rites. The hero beheld his father who had been put to death. Grieved exceedingly he began to bewail the unworthy fate that had laid his father low.

Rama said, “The blame is mine that like a stag in the wood, you have been shot dead with arrows, by those mean and stupid wretches, the sons of Kartavirya. Virtuous and unswerving from the path of righteousness and inoffensive to all animated beings as you were, how came it to be permitted by Fate that you should die in this way? What an awful sin must have been committed by them, who have killed you with hundreds of sharpened shafts, although you were an aged man, and engaged in penances at the time and absolutely averse to fighting with them. With what face will those shameless persons speak of this deed of theirs to their friends and servants, viz., that they have slain an unassisted and unresisting virtuous man?” Thus he, great in penance, bewailed much in a piteous manner, and then performed the obsequies of his departed sire.

Rama cremated his father on the funeral pyre, and vowed the slaughter of the entire military caste, and of exceeding strength in the field of battle, and possessed of valour suited to a heroic soul, and comparable to the god of death himself, he took up his weapon in wrathful mood, and single-handed put Kartavirya's sons to death. Rama thrice smote down all the Kshatriya followers of Kartavirya's sons. Seven times did that powerful lord exterminate the military tribes of the earth. In the tract of land, called Samantapanchaka five lakes of blood were made by him. There he offered libations to his forefathers, the Bhrigus, and Richika appeared to him in a visible form, and spoke to him words of counsel. Then the son of Jamadagni of dreaded name, performed a mighty sacrifice and gratified the lord of the celestials, and bestowed the earth to the ministering priests. He raised an altar made of gold, ten Vyamas in breadth and nine in height, and made a gift of the same to the magnanimous Kashyapa. Then at Kashyapa's bidding the Brahmanas divided the altar into a number of shares, and thus they became reputed as the Khandavayamas (share takers). The exterminator of the military race possessed of immense strength, bestowed the earth upon the high-souled Kashyapa, and then became engaged in penance of an exceedingly severe form.