Lactantius was the first to tell the story of Constantine's dream that caused him to have his soldiers to place the Chi-Rho symbol on their shields. The description appears toward the beginning of Book XLIV of Lactantius' work De Mortibus Persecutorum ("On the Deaths of the Persecutors", written about 318). According to Lactantius, the Chi-Rho originated in a dream that Constantine had shortly before "the sixth day before the kalends of November" (i.e., October 27) in the year 312, while he and his army were camped near Rome. The Battle of the Milvian Bridge took place the next day, October 28, 312.
And now a civil war broke out between Constantine and Maxentius. Although Maxentius kept himself within Rome, because the soothsayers had foretold that if he went out of it he should perish, yet he conducted the military operations by able generals.
In forces he exceeded his adversary; for he had not only his father's army, which deserted from Severus, but also his own, which he had lately drawn together out of Mauritania and Italy.
They fought, and the troops of Maxentius prevailed. At length Constantine, with steady courage and a mind prepared for every event, led his whole forces to the neighbourhood of Rome, and encamped them opposite to the Milvian bridge.
The anniversary of the reign of Maxentius approached, that is, the sixth of the kalends of November, and the fifth year of his reign was drawing to an end.
Constantine was directed in a dream to cause the heavenly sign to be delineated on the shields of his soldiers, and so to proceed to battle. He did as he had been commanded, and he marked on their shields the letter X, with a perpendicular line drawn through it and turned round thus at the top, being the cipher of CHRIST. Having this sign, his troops stood to arms.
Iam mota inter eos fuerant arma civilia. Et quamvis se Maxentius Romae contineret, quod responsum acceperat periturum esse, si extra portas urbis exisset, tamen bellum per idoneos duces gerebatur.
Plus virium Maxentio erat, quod et patris sui exercitum receperat a Severo et suum proprium de Mauris atque Gaetulis nuper extraxerat.
Dimicatum, et Maxentiani milites praevalebant, donec postea confirmato animo Constantinus et ad utrumque paratus copias omnes ad urbem propius admovit et a regione pontis Mulvii consedit.
Imminebat dies quo Maxentius imperium ceperat, qui est a.d. sextum Kalendas Novembres, et quinquennalia terminabantur.
Commonitus est in quiete Constantinus, ut caeleste signum dei notaret in scutis atque ita proelium committeret. Facit ut iussus est et transversa X littera, summo capite circumflexo, Christum in scutis notat. Quo signo armatus exercitus capit ferrum.
In his Life of Constantine, written many years after Lactantius' account (after Constantine's death in 337 and before Eusebius' own death c. 340), Eusebius tells a very different story. Chapter XXVIII of Book I describes an event that differs in time, place and manner. Eusebius places the event at an unspecified location - presumably in Gaul - at some point before Constantine reached the decision to invade Italy and try to oust Maxentius. (See Chapter XXXVII, in which Constantine begins to arm himself for the invasion of Italy only after these events.) Since Constantine entered northern Italy in the spring of 312, the vision must have taken place before that.
Here we find, for the first time, the famous story of the cross in the sky, seen by the whole army:
Accordingly [Constantine] called on God with earnest prayer and supplications that he would reveal to him who he was, and stretch forth his right hand to help him in his present difficulties. And while he was thus praying with fervent entreaty, a most marvelous sign appeared to him from heaven, the account of which it might have been hard to believe had it been related by any other person. But since the victorious emperor himself long afterwards declared it to the writer of this history, when he was honored with his acquaintance and society, and confirmed his statement by an oath, who could hesitate to accredit the relation, especially since the testimony of after- time has established its truth? He said that about noon, when the day was already beginning to decline, he saw with his own eyes the trophy of a cross of light in the heavens, above the sun, and bearing the inscription, CONQUER BY THIS. At this sight he himself was struck with amazement, and his whole army also, which followed him on this expedition, and witnessed the miracle.
Then in Chapters XXIX through XXI we learn that that night - again, months before the Battle of the Milvian Bridge - Constantine had a dream in which Christ appeared to him:
[Constantine] said, moreover, that he doubted within himself what the import of this apparition could be. And while he continued to ponder and reason on its meaning, night suddenly came on; then in his sleep the Christ of God appeared to him with the same sign which he had seen in the heavens, and commanded him to make a likeness of that sign which he had seen in the heavens, and to use it as a safeguard in all engagements with his enemies.
At dawn of day he arose, and communicated the marvel to his friends: and then, calling together the workers in gold and precious stones, he sat in the midst of them, and described to them the figure of the sign he had seen, bidding them represent it in gold and precious stones. And this representation I myself have had an opportunity of seeing.
Now it was made in the following manner. A long spear, overlaid with gold, formed the figure of the cross by means of a transverse bar laid over it. On the top of the whole was fixed a wreath of gold and precious stones; and within this, the symbol of the Saviour's name, two letters indicating the name of Christ by means of its initial characters, the letter P being intersected by X in its centre: and these letters the emperor was in the habit of wearing on his helmet at a later period. From the cross-bar of the spear was suspended a cloth, a royal piece, covered with a profuse embroidery of most brilliant precious stones; and which, being also richly interlaced with gold, presented an indescribable degree of beauty to the beholder. This banner was of a square form, and the upright staff, whose lower section was of great length, bore a golden half-length portrait of the pious emperor and his children on its upper part, beneath the trophy of the cross, and immediately above the embroidered banner.
On Eusebius' story, Ramsay MacMullen comments as follows in his biography of the emperor:
Incontestably, the account errs in introducing the princes into the picture [Constantine's eldest son, Crispus, was probably born between 299 and 305; his second son, Constantine II, was not born until 316]; it is almost certain that the labarum as a whole postdates 312; so also, the chrisma, and if the sky-writing was witnessed by forty thousand men, the true miracle lies in their unbroken silence about it.