In 2001, John was signed to Kanye West's label and lent his voice to a number of his songs. It was around this time he met poet J. Ivy, who upon listening to his music said: "I heard your music and it reminds me of that music from the old school.”
You sound like one of the legends. As a matter of fact, that's what I'm going to call you from now on! I'm going to call you John Legend.
Eventually the name stuck and, though initially reluctant to take a moniker, John ended up taking on the name Legend.