Wiktionary
Etymology 1 vb. (context intransitive English) To tell invented stories, often those that involve fantasy, such as fables. Etymology 2
n. 1 A folk story that is not entirely believable. 2 (context specifically English) A folk story that is told for entertainment, and not intended to be taken as true.
Usage examples of "fabulate".
Should we fabulate some tale of ocean monsters to intrigue our unwanted guests and possibly stave off fate for a while?
Seeing me taken aback by this consideration, she went on to deride the male-supremist character of the great body of our classic myths, with which she revealed a fairly extensive acquaintance -- Philonoë's influence, no doubt -- and which she held to be the fabulated record of a bloody overthrow, by male pig patriarchs in ages past, of the original and natural matriarchy of the world.