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In modern biology, a "species" can be defined as a group of organisms that are both capable of interbreeding, and that produce fertile offspring. In most standard fantasy worlds, humans and elves can interbreed, producing halfelves.
Humans and orcs can interbreed, producing halforcs. No indication is given that half-elves and half-orcs cannot produce fertile offspring, and as such humans, elves and orcs appear to be the same species. The lack of elf-orc crossbreeds could be explained by social, rather than genetic, factors.
Let us say, then, that these three races (and this term may be used correctly in the modern sense of the word here) are of the same species, and can interbreed as follows:
To complete the table we need to fill in the "?" spaces (which is only a single crossbreed). There are essentially two options. You could look for an existing race that fits the situation; for example, you could decide that the interbreeding of elves and orcs produces drow. Such a change may alter the race's place in the fantasy world, however. The second option is to create an entirely new race. This option will be pursued here, as follows:
Details of the new darkheart race are provided later in this section.
But what about dwarves, gnomes and halflings? Given the apparent human propensity to breed with any species it can (in a fantasy world), the lack of human crossbreeds of these races implies that they are not of the same species. However, given the obvious physical similarities between dwarves, gnomes, and halflings, it is possible that they form a separate species themselves. Of course, as a referee you can simply decide that they are not, and therefore cannot interbreed, thus eliminating the need for further explanation. That's perfectly valid, but here we will explore the possibilities if such a solution does not appeal to you.
There are two ways of looking at this, given that no crossbreed of these races appear among the standard PC races. First, you could consider one of them to be the result of the interbreeding of the other two races. For example, a gnome could be a dwarf/halfling crossbreed. Again, if you’re not looking to add new races to the mix, this could be your best answer:
However, the second option may be more appealing. To expand the possibilities, keep all three races as pureblooded, and fill in the blanks for their interbreeding with new races:
Hammerling, kabouter and nisser are new races, presented later in this section.
Moving beyond the division of the standard races into two separate species, you could also include all standard races into the interbreeding mix as a single species. Again, there are two ways to do this. One would avoid adding any new races, as follows:
Here, only dwarves, elves, humans and orcs are pureblooded, while gnomes and halflings are crossbreeds.
Of course, this scheme would require redefining the places that gnomes, halflings, duergar, and drow have in the world. To avoid this, you can simply go all-out and allow all races to interbreed, making dwarves, elves, gnomes, halflings, humans and orcs all pureblooded, and introducing new crossbreeds as needed:
In addition to the darkheart, hammerling, kabouter and nisser mentioned previously, new races
introduced here are dwelf, elfling, erlking, gobel, half-dwarf, half-gnome, puki, treiling and vetter.
Details of all of these new crossbreeds follow.