The earliest reference comes from a handwritten note in a German edition of New Testament, published in 1540, written by Georg Rörer (1492-1557): “On the eve of the festival of All Saints' in the year 1517 the theses concerning indulgences were posted by Doctor Martin Luther to the doors of the Wittenberg church.”

Rörer was one of Luther's first associates, having moved to Wittenberg in 1522 to study under the great reformer. He was ordained in May 1525—the first person to receive his ordination in the new creed—married an ex-nun named Magdalena in 1528, and was promoted to the rank of doctor of theology in 1535. Throughout his career, Rörer devoted himself to transcribing Luther's sermons, lectures, letters and dinner-table conversations.

The first to popularize the story was another, more famous student of Luther's, Philipp Melanchthon (1497-1560), who included the following text in his introduction to the second volume of Luther's works, published in 1546:

In hoc cursu cum esset Lutherus, circumferuntur venales Indulgentiae in his regionibus a Tecelio Dominicano, impudentissimo Sycophanta, cuius impiis et  nefariis concionibus irritatus Lutherus, studio pietatis ardens, edidit  Propositiones de Indulgentiis, quae in primo Tomo monumentorum eius extant, et  has publice Templo, quod Arci Vuiteberdensi contiguum est, affixit pridie  festi omnium Sanctorum, Anno 1517 [Philip Melanchthon, Historia de vita et actis Lutheri]

Here is an early translation of the passage into English, from 1561:

“Whilest Luther was in this course of study, a certaine Dominicke Frier named Tecel, a most impudent Sicophant (if ever there raygned any) caused the Popes Indulgences or Pardons to be caryed and sold about the Country. Luther, much moued wyth the blasphemous sermons this shameles Friar preached, and hauyng hys hart earnestly bent wyth ardent desire to maytnaine true religion, published certain proposicions of Indulgences, which are in the first Tome of hys woorkes, and fixed them openlye on the Temple that ioyneth to the Castell of Witeberge, the morrow [before] the feast of all Saynctes, the yeare 1517.”

Philip Melanchthon, A famous and godly history, contaynyng the Lyues & Actes of three renowmed reformers of the Christian Church, Martine Luther, John Ocolampadius, and Huldericke Zuinglius […] London: John Awdely, 1561, Cir-v

A major theologian in his own right, Melanchthon—the name is a Greek rendering of his family name, Schwarzerd—who is best known for his Common Places of Theology (Loci communes rerum theologicarum) (1521), the first attempt at a systematic Lutheran theology, and for the “Augsburg Confession,” a summary of the principle stances of Protestant theology and liturgy, worked out with other evangelical theologians at the Imperial Diet at Augsburg in 1530.

This single-leaf illustrated flyer contains an early depiction of Luther and the ninety-five theses. Luther is shown standing in the doorway of a fortified church, holding a torch in his right hand and a large book in his right, on which are written the words Scrutamini scripturas—“search the scriptures.” Luther's torch repels a rampant, vomiting gryphon that wears the papal tiara—an obvious representation of the papacy. Escaping the scene to the left is a monk, wearing a fool's cap, carrying indulgences in his right hand and from a rack on his left shoulder. Insects, probably representing demons, fly about his head; scurrying after off with are three mice, wearing theologian's caps. The drawing was etched by “C.G.” and was published to celebrate the Reformation's “Jubilee”—that is, the hundredth anniversary of the Ninety-Five Theses (1617).

Source: Georg Buchwald, Karl Stockmeyer, Die Geschichte der deutschen Kirche und kirchlichen Kunst im Wandel der Jahrhunderte (Cologne: Wartburg, 1927).