As the work got under way, General Groves explains (in Now It Can Be Told: The Story of the Manhattan Project), some amazing rumors began to circulate through Santa Fe, some thirty miles away:
Typical of these was that old stand-by that we were building a home for pregnant WAC’s.
[…]
After a number of Navy officers had been assigned to the project, and were seen on the streets of Santa Fe, rumors burgeoned about the new type of submarine that was being perfected on the Hill, as Los Alamos came to be known locally. Although the nearest navigable body of water was many hundreds of miles away, this rumor sounded entirely plausible to a number of people.
[…]
Colonel G. R. Tyler, the military commander at Los Alamos, once boarded a train at the railway stop nearest Santa Fe, and in the club car sat next to a man in civilian clothes who had gotten on at the same station. The stranger at once began a one-sided, rapid-fire conversation. It was obvious that he had failed to note the fact that Tyler had boarded the train at the same time that he had for, finally, he lowered his voice and said, “If we can find a secluded spot, I can tell you something which, I think, will interest you.”
Both men walked to the vestibule of the car, and stood while the man related his story. “You’d never believe the strange things that are happening on a certain mountain about fifty miles from Santa Fe. They’re doing some work that is very secret and the place is surrounded by belts of tall wire fencing. In order to keep intruders out, between these belts of fences they keep ferocious packs of wild African dogs. Besides, there are thousands of heavily armed soldier guards, and I can tell you that a number of people have been killed by the guards, or torn to pieces by the animals. It’s a frightful thing! However, I suppose that in wartime these things have to be.” He then told of other strange happenings on the Hill, none of which were true, and concluded with, “Of course, I happen to be one of the very few residents of Santa Fe who know what they are doing up there, but I do hope that you won’t ask me any questions. You see, I’ve given my word of honor that I will not divulge their secrets.”
By this time the train was approaching Tyler’s station, and as the stranger followed him to the platform he said, “Colonel, I forgot to ask you, but where are you stationed, and what sort of an assignment have you?” The officer replied, “I am stationed at Los Alamos, and I command the military personnel there.” The horrified and now extremely red-faced stranger said, “I hope that you’ll forget everything that I’ve told you. I don’t really know what’s going on at the Hill. I merely repeated some of the things that I’ve heard.”