The revival of fantasy in Chinese children's literature after 1978 marks one of the most significant developments in contemporary Chinese literary history. Following the implementation of China's Reform and Opening-Up policy, writers were granted greater creative freedom, allowing children's literature to move beyond the political and educational functions that had dominated during the Cultural Revolution (1966–1976). Fantasy emerged as a vibrant literary mode through which authors could explore imagination, folklore, childhood, morality, identity, and social transformation. This paper examines the historical conditions that facilitated the return of fantasy in Chinese children's literature after 1978 and analyzes the literary characteristics of representative works by prominent writers such as Zheng Yuanjie, Cao Wenxuan, and others. Drawing on literary criticism and historical scholarship, the study investigates how fantasy integrates traditional Chinese myths with modern storytelling techniques while responding to changing social and cultural realities. The paper argues that the resurgence of fantasy not only transformed children's literature into a more artistically sophisticated genre but also reflected China's broader cultural modernization and renewed appreciation of creativity, individuality, and childhood imagination.