In German literature, many dwarfs can make themselves invisible, with a cloak of invisibility, which has been suggested to be an ancient attribute of dwarfs. Dwarfs feature in the modern folklore of Germanic-speaking regions of Europe, such as the Simonside Dwarfs in Northumberland, who are sometimes believed to use lights to lure people off paths, similar to a will-o'-the-wisp. Based on the etymology of dwarf, it has been proposed that the oldest conception of a dwarf was as exclusively a formless spirit, potentially as in the case of disease-causing dwarfs; however, this view is not seen in the oldest manuscript accounts.

They have been used in many fairy tales, fantasy, fiction and role-playing games. Some societies represent them as being short, but original mythology does not, as they were described synonymous with elves in some stories. In some tales, dwarfs are mean spirited, living under bridges, and having a foul reputation for pilfering treasure. One example is the Norwegian Troll that It is an ugly and foolish creature who tells falsehoods and causes problems far and wide, and is how the Internet troll got its name. In manifestation they were sometimes beautiful, but more usually they gave the appearance of grave old men with long beards and, in some cases, humped backs.

The mountain dwarfs were organized in kingdoms or tribes, with their own kings, chieftains, and armies. Numerous legends depict dwarfs as kindly beings, generous to those who pleased them but unforgiving when offended. The Swiss dwarfs, or “earth-men,” sometimes helped in agricultural work, found straying animals, and put out firewood or fruit for poor children to find. Mine-dwelling dwarfs were usually more capricious and spiteful than their mountain brothers. They could be heard moving about the lower levels and were sometimes seen by miners, who took care to placate them by gifts of food.