Elements of the supernatural and the fantastic were an element of literature from its beginning. The modern fantasy genre is distinguished from tales and folklore which contain fantastic elements, first by the acknowledged fictitious nature of the work, and second by the naming of an author. Authors like George MacDonald (1824–1905) created the first explicitly fantastic works.

Later, in the twentieth century, the publication of The Lord of the Rings by J. R. R. Tolkien enormously influenced fantasy writing, establishing the form of epic fantasy. This also did much to establish the genre of fantasy as commercially distinct and viable. Today, fantasy encompasses many subgenres, including traditional high fantasy, sword and sorcery, fairytale fantasy, and dark fantasy.

Differences between fantasy and earlier fantastic works

Even the most fantastic myths, legends and fairy tales differ from modern fantasy genre in three respects:

Modern genre fantasy postulates a different reality, either a fantasy world separated from ours, or a hidden fantasy side of our own world. In addition, the rules, geography, history, etc. of this world tend to be defined, even if they are not described outright. Traditional fantastic tales take place in our world, often in the past or in far off, unknown places. It seldom describes the place or the time with any precision, often saying simply that it happened "long ago and far away." (A modern, rationalized analog to these stories can be found in the Lost World tales of the 19th and 20th centuries.)

The second difference is that the supernatural in fantasy is by design fictitious. In traditional tales the degree to which the author considered the supernatural to be real can span the spectrum from legends taken as reality to myths understood as describing in understandable terms more complicated reality, to late, intentionally-fictitious literary works.Michael Moorcock, Wizardry & Wild Romance: A Study of Epic Fantasy pp 24-25

Finally, the fantastic worlds of modern fantasy are created by an author or group of authors, often using traditional elements, but usually in a novel arrangement and with an individual interpretation. Traditional tales with fantasy elements used familiar myths and folklore, and any differences from tradition were considered variations on a theme; the traditional tales were never intended to be separate from the local supernatural folklore. Transitions between the traditional and modern modes of fantastic literature are evident in early Gothic novels, the ghost stories in vogue in the 19th century, and Romantic novels, all of which used extensively traditional fantastic motifs, but subjected them to authors' concepts.

By one standard, no work created before the fantasy genre was defined can be considered to belong to it, no matter how many fantastic elements it includes. By another, the genre includes the whole range of fantastic literature, both the modern genre and its traditional antecedents, as many elements which were treated as true (or at least not obviously untrue) by earlier authors are wholly fictitious and fantastic for modern readers. But even by the more limited definition a full examination of the history of the fantastic in literature is necessary to show the origins of the modern genre. Traditional works contain significant elements which modern fantasy authors have drawn upon extensively for inspiration in their own works.

Development of fantasy

Romances

With increases in learning in the medieval European era, literary fiction joined earlier myths and legends. Among the first genres to appear was romance. This genre embraced fantasy, and not only simply followed traditional myths and fables, but, in its final form, added new fantastical elements. Romance at first dealt with traditional themes, above all three thematic cycles of tales, assembled in imagination at a late date as the Matter of Rome (focusing on military heroes like Alexander the Great and Julius Caesar), the Matter of France (Charlemagne and Roland, his principal paladin) and the Matter of Britain (the lives and deeds of King Arthur and the Knights of the Round Table, within which was incorporated the quest for the Holy Grail), although a number of "non-cyclical" romances also achieved a great deal of popularity.

The romances themselves were fictional, but such tales as Valentine and Orson, Guillaume de Palerme, and Queste del Saint Graal were only the beginning of the fantasy genre, combining realism and fantasy.

During the Renaissance, romance continued to be popular. The trend was to more fantastic fiction. The English Le Morte d'Arthur by Sir Thomas Malory (–1471), was written in prose; this work dominates the Arthurian literature, often being regarded as the canonical form of the legend. Arthurian motifs have appeared steadily in literature from its publication, though the works have been a mix of fantasy and non-fantasy works. At the time, it and the Spanish Amadis de Gaula (1508), (also prose) spawned many imitators, and the genre was popularly well-received, producing such masterpiece of Renaissance poetry as Ludovico Ariosto's Orlando furioso and Torquato Tasso's Gerusalemme Liberata. Ariosto's tale, with its endlessly wandering characters, many marvels, and adventures, was a source text for many fantasies of adventure. With such works as Amadis of Gaul and Palmerin of England, the genre of fantasy was clearly inaugurated, as the marvels are deployed to amaze and surprise readers.

One English romance is The Faerie Queene of Edmund Spenser.

The Enlightenment

Literary fairy tales, such as were written by Charles Perrault (1628 – 1703), and Madame d'Aulnoy (c.1650 – 1705), became very popular, early in the Age of Enlightenment. Many of Perrault's tales became fairy tale staples, and influenced latter fantasy as such. Indeed, when Madame d'Aulnoy termed her works contes de fée (fairy tales), she invented the term that is now generally used for the genre, thus distinguishing such tales from those involving no marvels.Jack Zipes, The Great Fairy Tale Tradition: From Straparola and Basile to the Brothers Grimm, p 858, This would influence later writers, who took up the folk fairy tales in the same manner, in the Romantic era.L. Sprague de Camp, Literary Swordsmen and Sorcerers: The Makers of Heroic Fantasy, p 9-11

Several fantasies aimed at an adult readership were also published in 18th century France, including Voltaire's "contes philosophique" "The Princess of Babylon" (1768) and "The White Bull" (1774), and Jacques Cazotte's Faustian novel The Devil in Love.Brian Stableford, The A to Z of Fantasy Literature, p xx, Scarecrow Press, Plymouth. 2005.

This era, however, was notably hostile to fantasy. Writers of the new types of fiction such as Defoe, Richardson, and Fielding were realistic in style, and many early realistic works were critical of fantastical elements in fiction.Lin Carter, ed. Realms of Wizardry p xiii-xiv Doubleday and Company Garden City, NY, 1976 Aside from a few tales of witchcraft and ghost stories, very little fantasy was written during this time. Even children's literature saw little fantasy; it aimed at edifying and deplored fairy tales as lies.Marion Lochhead, Renaissance of Wonder p1

Romanticism

Romanticism highly prized the supernatural, tradition and imagination.John Grant and John Clute, The Encyclopedia of Fantasy, "Romance", p 821

Gothic tales permitted, but did not require, an element of the supernatural. Some stories appeared to contain such elements and then explained them away. The genre has been argued by some to straddle the border between fantasy and non-fantasy, but many elements from it, particularly the houses of particular import, being ancient, owned by nobles, and often endowed with legends, were incorporated in modern fantasy.John Grant and John Clute, The Encyclopedia of Fantasy, "Gothic fantasy", p 424

Of particular importance to the development of the genre was that the Gothic writers used novelistic techniques, such as Defoe was using, rather than the literary style of the romance, and also began to use the landscape for purposes of expressing the characters' moods.Michael Moorcock, Wizardry & Wild Romance: A Study of Epic Fantasy p 36

On the other hand, the Gothic still held back the pure fantasy. In The Castle of Otranto, Walpole presented the work as a translation; the fictitious original author is therefore responsible for its fantastical elements, which Walpole distances himself from.Farah Mendlesohn, Rhetorics of Fantasy, p 121-2, One noted Gothic novel which also contains a large amount of fantasy elements (derived from the "Arabian Nights") is Vathek by William Thomas Beckford.Brian Stableford, The A to Z of Fantasy Literature, p 40, Scarecrow Press, Plymouth. 2005.

The Romantic interest in medievalism also resulted in a revival of interest in the literary fairy tale. The tradition begun with Giovanni Francesco Straparola and Giambattista Basile and developed by Charles Perrault and the French précieuses, was taken up by the German Romantic movement. Friedrich de la Motte Fouqué created medieval-set stories such as Undine (1811)Brian Stableford,"Undine",(pp. 1992-1994). in Frank N. Magill, ed. Survey of Modern Fantasy Literature, Vol 4. Englewood Cliffs, NJ: Salem Press, Inc., 1983. and Sintram and his Companions (1815) which would later inspire British writers such as MacDonald and Morris.Mike Ashley, "Fouqué, Friedrich (Heinrich Karl),(Baron) de la Motte",(p. 654-5) in St. James Guide To Fantasy Writers, edited by David Pringle. St. James Press, 1996. Veronica Ortenberg, In Search of the Holy Grail: The Quest for the Middle Ages, (38-9) Continuum International Publishing Group, 2006, . E. T. A. Hoffmann's tales, such as "The Golden Pot" (1814) and "The Nutcracker and the Mouse King" (1816) were notable additions to the canon of German fantasy. Penrith Goff, "E.T.A. Hoffmann", (pp.111-120) in E. F. Bleiler, Supernatural Fiction Writers: Fantasy and Horror. New York: Scribner's, 1985. Ludwig Tieck's collection Phantasus (1812-1817) contained several short fairy tales, including "The Elves".D. P Haase, "Ludwig Tieck" (pp.83-90), in E. F. Bleiler, Supernatural Fiction Writers: Fantasy and Horror. New York: Scribner's, 1985.

In France, the main writers of Romantic-era fantasy were Charles Nodier, with Smarra (1821) and Trilby (1822)Franz Rottensteiner, The Fantasy Book:an illustrated history from Dracula to Tolkien (p. 137) Collier Books, 1978. A. Richard Oliver, Charles Nodier:Pilot of Romanticism. (p. 134-37) Syracuse University Press, 1964. and Théophile Gautier in stories such as "Omphale" (1834) and "One of Cleopatra's Nights" (1838), and the later novel Spirite (1866).Brian Stableford, The A to Z of Fantasy Literature (p. 159), Scarecrow Press, Plymouth. 2005. Brian Stableford, "Théophile Gautier", (pp. 45-50) in E. F. Bleiler, Supernatural Fiction Writers: Fantasy and Horror. New York: Scribner's, 1985.

In Britain, Sara Coleridge also wrote a fantasy novel, Phantasmion (1837), described as "the first fairytale novel written in English".Roderick McGillis, "Phantasmion", p 1238-1240, in Frank N. Magill, ed. Survey of Modern Fantasy Literature, Vol 3. Englewood Cliffs, NJ: Salem Press, Inc., 1983.

Modern fantasy

Pre-Tolkien

In the early Victorian era, stories continued to be told using fantastic elements, less believed in. Charles Dickens wrote A Christmas Carol, using novelistic characterization to make his ghost story plausible;Stephen Prickett, Victorian Fantasy p 56-59 Scrooge at first doubts the reality of the ghosts, suspecting them his own imagination, an explanation that is never conclusively refuted.