Fantasy stories and made-up worlds have been around since before Shakespeare — though A Midsummer Night’s Dream certainly did provide inspiration for many a tale. Fantasy as an official literary genre showed up around the 1700s, but many fantastical words already existed on paper.
Somniatory
So rare it's almost considered obsolete, "somniatory" is an adjective for things that occur in dreams or in sleep. A somniatory landscape is the perfect place for a fantastical warning from a magical source.
Liminal
"Liminal" is an adjective for something at a boundary or transitional point. It’s the space between destinations, and the word is useful in both sci-fi and fantasy fiction. "Liminal" describes the experience of a character stuck between one world and another.
Simulacrum
There are lots of imitations and copies in fantasy worlds. Consider The Wizard of Oz — the Tin Man, the Scarecrow, the Cowardly Lion, and even the Wizard himself all represented facets of society. A simulacrum is an image of a real-life person or object that, just like the Wizard, usually amounts to less than expected.
Phantasmagoria
"Phantasmagoria" is a fantastical word for a series of real or imagined events like those seen in a dream. The word appeared in the early 1800s as the name of an optical illusion exhibition, and has since been used to describe a series of fantastical events too outrageous to believe.
Envisage
How can one create a fantasy world or creature without picturing it first? To envisage, or to contemplate a mental picture of something not yet existing or known, must be the fantasy writer's philosophy.
Chimera
In fantasy worlds, the chimera is often an animal made up of stitched-together parts to make a new breed of beast. In genetics, it's an organism that contains genetically different tissues. It's often seen as a cat with different coloring on each side of their face, split perfectly down the middle.
Legerdemain
"Legerdemain" originated from a French phrase meaning “light of hand.” Think about a magician waving their wand, or a wizard casting a dramatic spell. "Legerdemain" is the word for all those fancy gestures that make the feathers float in Harry Potter’s Charms class.
Soothsayer
In a fantasy world, soothsayers can see events to come by magical means, while others are more like prognosticators — people who predict the future based on logic and reason.
Theriomorphic
Theriomorphic characters enter into almost any fantasy story. The Greek gods — how often did they appear as animals? And what about Professor McGonagall turning into a cat over the course of the Harry Potter series? Each of them has a theriomorphic form — more simply, an animal form.