The Quran

حَتّىٰ إِذا بَلَغَ مَغرِبَ الشَّمسِ وَجَدَها تَغرُبُ في عَينٍ حَمِئَةٍ وَوَجَدَ عِندَها قَومًا ۗ قُلنا يا ذَا القَرنَينِ إِمّا أَن تُعَذِّبَ وَإِمّا أَن تَتَّخِذَ فيهِم حُسنًا

Muhammad Asad

[And he marched westwards] till, when he came to the setting of the sun,¹ it appeared to him that it was setting in a dark, turbid sea;² and nearby he found a people [given to every kind of wrongdoing]. We said: "O thou Two-Horned One! Thou mayest either cause [them] to suffer or treat them with kindness!"³

I.e., the westernmost point of his expedition (Razi).
Or: "abundance of water" - which, according to many philologists (cf. Taj al-'Arus), is one of the meanings of 'ayn (primarily denoting a "spring"). As for my rendering of the phrase "he found it (wajadaha) setting...", etc., as "it appeared to him that it was setting", see Razi and Ibn Kathir, both of whom point out that we have here a metaphor based on the common optical illusion of the sun's "disappearing into the sea"; and Razi explains this, correctly, by the fact that the earth is spherical. (It is interesting to note that, according to him, this explanation was already advanced in the - now lost - Qur'an-commentary of Abu 'Ali al-Jubba'i, the famous Mu'tazili scholar who died in 303 H., which corresponds to 915 or 916 of the Christian era.)
This divine permission to choose between two possible courses of action is not only a metonymic statement of the freedom of will accorded by God to man, but establishes also the important legal principle of istihsan (social or moral preference) open to a ruler or government in deciding as to what might be conducive to the greatest good (maslahah) of the community as a whole: and this is the first "lesson" of the parable of Dhu'l-Qarnayn.