The Collaborative International Dictionary of English v.0.48:

Mythologize \My*thol"o*gize\, v. i. [Cf. F. mythologiser.]
   1. To relate, classify, and explain, or attempt to explain,
      myths; to write upon myths.
      [1913 Webster]

   2. To construct and propagate myths.
      [1913 Webster]

WordNet (r) 3.0 (2006):

mythologize
    v 1: construct a myth; "The poet mythologized that the King had
         three sons" [syn: mythologize, mythologise]
    2: make into a myth; "The Europeans have mythicized Rte. 66"
       [syn: mythologize, mythologise, mythicize, mythicise]
       [ant: demythologise, demythologize]