I had always head that Vishwakarma was designing the deities at Jagannatha when he was disturbed that is why he left them incomplete. But I couldn't find any reference in the scriptures for the same. Can some tell me which scripture narrates the story of Vishwakarma creating the idols of Lord Jagannatha, Balbhadra and Subhadra?
Which scripture mentions Vishwakarma made the deities at Jagannatha?
This is said in Chapter 47 of Brahma Purana (on Archive by Dr. Narinder Sharma). It seems few Chapters are merged in this version on Archive. The equivalent Sanskrit Shlokas can be found in Chapter 50 of Brahma Purana (on sanskritdocuments).
The relavant Sanskrit shloka and it's English translation is as below:
श्रुत्वैतद् वचनं तस्य विश्वकर्मा सुकर्मकृत् ।
तत्क्षणात् कारयामास प्रतिमाः शुभलक्षणाः ॥ ५०.४८ ॥
On hearing his (Vishnu's) words, Vishvakarma did all efficiently, instantaneously. He (Vishvakarma) made the idols of auspicious traits.
The summary of story can be found in this English abridged version.
Puri Jaganatha Kshetram is known as Purushottama Kshetra. Its mentions are found in many puranas. Skanda Purana being the longest Purana has references to many Kshetras. It has story of Jagannath too.
From Purushottama Kshetra Mahatmya of Vaishnava Khanda of the Skanda Purana has a lot of information about it.
The story present in the Skanda Purana is different from what is ppopular in the lore. According to purana, it is Lord Narayana who took the form of old carpenter. Son of Vishwakarma (or Vishwakarma there is mention of both) builds the idol of Narasimha and not Jagannatha and other idols.
From Chapter 18 of Purushottama Kshetra Mahatmya,
While Nãrada and the king were discussing thus, an unembodied divine speech was heard from the firmament.
36-43a. The speech was heard by all those who were present there with great surprise:
“The Lord is not under the influence of any person. He is beyond the path of discourse and contemplation. He will directly incarnate in the great Altar which shall be kept well-concealed. Let that be cove red for the next fifteen days. Let this old carpenter who is present here with weapons (and instruments) in his hands be allowed to go in and let the doors be closed carefully thereafter.
Let there be instrumental music as long as the carving work goes on. If the sound of chiselling or carving is heard it will result in deafness and blindness. He who hears it will go to hell and his line may become extinct.
No one shall enter the place nor peep in. If anyone other than the employee looks in1 there is great danger to the king. the realm and the person who looks in. Both of his eyes will become blind. Hence as long as the idol is completely carved and chiselled no one shall look into the premises. If the work is concluded, the Lord himself shall announce it. Whatever is to be done for the sake of the happiness of all the worlds the Lord himself will announce.”
43b-46. On hearing these words Narada and others desired to do what had been mentioned by Vinu himself. By that time the carpenter too came there. He said to the king. “With the wood of divine form I shall fashion ill those things seen by you in the dream.” After saying this Lord Narayana who himself took the form of the old carpenter for the sake of deceiving (ordinary) men, vanished behind the Altar.
After fifteen days, the work was completed. By his own wish, Lord Vishnu manifested in the form of tree. He also informs how to worship them and instructs king Indradyumna and others how to decorate the idols with colours, ornaments and changing the idols every year which is even followed today.