Text-to-image generation is a significant domain in modern computer vision and achieved substantial improvements through the evolution of generative architectures. Among these, diffusion-based models demonstrated essential quality enhancements. These models generally split into two categories: pixel-level and latent-level approaches. We present Kandinsky – a novel exploration of latent diffusion architecture, combining the principles of image prior models with latent diffusion techniques. The image prior model, is trained separately to map CLIP text and image embeddings. Another distinct feature of the proposed model is the modified MoVQ implementation, which serves as the image autoencoder component. Overall the designed model contains 3.3B parameters. We also deployed a user-friendly demo system that supports diverse generative modes such as text-to-image generation, image fusion, text and image fusion, image variations generation and text-guided inpainting/outpainting. Additionally we released the source code and checkpoints for Kandinsky models. Experimental evaluations demonstrate FID score of 8.03 on the COCO-30K dataset, marking our model as the top open source performer in terms of measurable image generation quality.