St. Petersburg was built by Peter the Great at the spot where the Neva River, which flows about forty miles from Lake Ladoga, meets the Gulf of Finland off the Baltic Sea. Basically, Peter ordered the city built on the marshy, swampy, delta with all of the islands and channels. So you had a lot of water, a lot of flooding, and a very long winter because the city is located so far north, to deal with.
Three hundred years ago, this was a place where no sane person would have wanted to live. The marsh lay just off the icy, storm-blasted Gulf of Finland, and what little firm ground there was disappeared regularly beneath the floods. The nearest approximation of civilization was hundreds of miles away. Yet it was here that Peter the Great chose to build his "darling," his "paradise," the imperial city that for three centuries has embodied the soul of Russia. (Source: www.jcs-group.com/master/1400inca.html)
Nevertheless, in May 1703 Peter began construction of the city by starting with the Peter and Paul Fortress. To actually accomplish building a city in the swamp, Peter needed (a) a lot of workers working in inhuman conditions, (b) a lot of oak pilings to pound into the marshy ground, (c) lot of stone fill and ground (often dug by hand and carried by hand) to raise the islands above water level, (d) the tsar's irrepressible determination and energy to keep the project moving along and (e) luck that everything didn't wash away in the next flood.
Peter had the good fortune to be an absolute monarch; he could find solutions to these problems with the simple issue of a decree, and he also had the state treasury to carry out his dream.
To solve the personnel problem, he simply ordered peasants to come to St. Petersburg. He also used prisoners-of-war and convicts. The work was back-breaking, pounding oak staves into the muck, dumping rocks and dirt as fill, living in rough shacks. Estimates are that anywhere from between twenty to thirty thousand people died building the city. I think that Aleksandr Pushkin said something somewhere about Petersburg being built on bones.
Peter made up for the site's lack of building materials by ordering all wagons and ships arriving in the new city to bring stones. He also forbade the construction of any stone buildings in the Russian Empire while St. Petersburg was being built.
The city also needed inhabitants. So, in March 1708, Peter commanded noblemen and wealthy merchants to leave Moscow and build new houses in St. Petersburg. Detailed plans were drawn up about how large the new houses had to be and where they would be located.
Note that Peter did not just want to build just another Moscow, a Russian city. He wanted a new, European-style capital in the baroque style. Domenico Trezzini (1670-1734), a Swiss architect, became the master builder and helped to lay out and design most of the city for Peter.
Some excellent websites on the founding of St. Petersburg: