In the very early morning hours after Myrtle Wilson's death, Gatsby tells Nick of his past, including what Nick terms "the strange story of his youth with Dan Cody." After talking of his time with Cody, Gatsby explains his history with Daisy, from the time he first met her in Louisville when Gatsby was stationed at Camp Taylor during World War I until Gatsby returned from the war while Tom and Daisy were still on their honeymoon.
In the interim, he explained, he had fallen deeply in love with Daisy, abandoned his original great ambitions to be with her, and had to leave her in Louisville when he was shipped to the Western Front. Daisy married Tom instead of waiting for Gatsby to return. After being delayed in England on his way home from the war, Gatsby returned to Louisville, "a miserable but irresistible journey." For a week, he revisited the places where he and Daisy had lived their romance. Finally, emotionally spent and penniless, Gatsby left Louisville behind, feeling that "if he had searched harder he might have found her."
The reader can infer that Gatsby is finally telling Nick the truth about his past. Nick recognizes a difference in Gatsby: ". . . 'Jay Gatsby' had broken up like glass against Tom's hard malice . . . I think that he would have acknowledged anything, now, without reserve . . . ."
In Chapter Eight of The Great Gatsby, Gatsby finally reveals to Nick the story of his youthful courtship with Daisy in Louisville in 1917. Back then, Gatsby was still a relatively poor soldier who was about to be shipped out to Europe to fight in World War I. Gatsby was simultaneously intimidated and enchanted by Daisy's wealth and high position in society. Although he saw her as the first girl he ever felt close with--an emotional intimacy which manifested into a physical one--he knew that he was not worthy of her yet. Thus, he lied to her about his background. When he disembarked for the war, Daisy agreed to wait for him; however, this promise was clearly broken when he returned to find Daisy had married Tom instead.
This is, indeed, a true story. Nick recognizes at this point that this is Gatsby at his most authentic, most vulnerable--a shift likely brought on by the traumatic events of that day (Daisy's refusal to commit to him, the death of Myrtle, etc.).