No, the series is not at all based on real Mirzapur. It is not a real story. The story was created by the writers. We can say some part of the story was inspired from real legends and stories. The writers used real names and real locations but most part is fiction.
From Mirzapur's co writer Karan Anshuman interview to scroll.in:
We had this idea for a gangster drama, and I felt that the best way to do it in India was to set it in the hinterlands, in the back of beyond. We [co-writers Puneet Krishna and Vineet Krishna] had access to a lot of stories based on our research, but we wanted to create a world that was hyper-real and amped up. We created a world of violence where even the nicest person would own a gun and could pull the trigger if the need arose.
The writers had an idea of writing a story in Gangster Drama genre. So, they did their research for the story and development of the script. In this process, they met some gangsters from the past and many stories and legends. Two main characters Guddu and Bablu are based on real boys. So, the writers spun the story and developed script from these characters and events using their imagination.
We learned new things, like how desi kattas [locally produced guns] are manufactured. We met retired gangsters, if you can call them that. We came across many stories and legends. Guddu [Ali Fazal] and Bablu’s [Vikrant Massey] stories were based on two real boys who rode a bike and went around terrorising the town. We researched the drug trade. But because the world is so fictionalised and dramatised, we let our imagination run wild............The story is set in Mirzapur and Bhadohi in Uttar Pradesh, and between the two, Mirzapur sounded better. But the story is fictionalised and not based on the real Mirzapur at all.
So, it is clear that the show is fiction.