Creating fantasy worlds and creatures is a talent that is specific to fiction writing, and, within fiction writing, it is specific to a particular genre. When writing fantasy, you are only limited by the boundaries of your imagination, and, as a writer, your imagination should be limitless.
There are several techniques to help you build your world and your characters in a fantasy novel.
Borrow ideas from history and build on them. You can create a fictional character based on a historical figure and alter them to suit the world you are placing them in, or you can create a fantasy world with elements that resemble the real world as it was in the past. Use different religions and cultures and twist them to fit in your world, different but with similarities.
Fantasy worlds and characters have their roots in reality. If the world you create is so fantastical that it comes across as implausible, you will lose your readers. While there are no limits in fantasy, it still needs to be rooted in something more easily believed. Your characters need to experience real emotions and act accordingly; it's what will help your readers identify with them even if the character isn't human or lives a life completely different than your readers live. And worlds, even fantastical ones, will follow simple rules. There will be good and bad people (or creatures) in those worlds and there will always be progress of some sort. Your fantasy world's cities might even have corrupt leaders, just like in real life. Give your readers something they can relate too, no matter how much the world or the characters differ from reality.
Use mythological creatures and tales. Our reality is full of stories, myths about gods and goddesses, legends about dragons, sirens and fairies. You can base the creatures of your world on these creatures of fable. Just because fire-breathing dragons don't live in our reality doesn't mean that they can't exist in the fantasy world you are creating. Likewise, trolls, ogres, vampires and more can easily exist in your fantasy world.
Avoid stereotypes and cliches. While you can use mythological creatures in your fantasy world, they don't need to be exactly as they are in our folklore. They are myth, and myth is built on stories, so create your own stories for them. Create something entirely new that none of your readers will have heard or read about before. The Harry Potter books by J. K. Rowling are full of creatures that borrow from mythology but are so different from mythological creatures that we are not entirely sure about the resemblance. The Harry Potter universe also has completely new creatures and mythos. J. K. Rowling's world has its own legends and stories, and fables about good and evil. If all of the creatures in the Harry Potter series were recognizable from our legends and fables, we, as readers, would not have become as enthralled with the fantasy world portrayed in the books. Not only are there creatures that are entirely different from what we expect, but they often act in a way that we do not expect. This keeps things interesting for the reader.
I cannot emphasize enough the importance of allowing your imagination to be boundless when creating your fantasy world or characters. Werewolves don't have to change on the full moon, unicorns don't have to be on the side of good, there doesn't have to be only one moon and nothing has to be the way we expect. Build your world and build your characters as if you are their god of creation; your ability to craft this world and the creatures on it has no limits. Are you a loving god of creation, giving your most favored creatures an edge over others in this world, or are you a cold and uncaring god placing them in a hostile environment, where everything that exists in the world exist to kill or maim? As the writer creating your fantasy world and its characters, it's entirely up to you.
And now for the announcement of the winner of the "Novel Under Construction" mug, drawn by a random number generator.
The winner is: