In 1938, entering a literary contest of the Nigerian education ministry, Fagunwa wrote his Ògbójú ?d? nínú Igbó Irúnmal??, widely considered the first novel written in the Yoruba language and one of the first to be written in any African language. Wole Soyinka translated the book into English in 1968 as The Forest of A Thousand Daemons, first published by Random House and again by City Lights in September 2013 (ISBN 9780872866300). Fagunwa's later works include Igbo Olodumare (The Forest of God, 1949), Ireke Onibudo (1949), Irinkerindo ninu Igbo Elegbeje (Expedition to the Mount of Thought, 1954), and Adiitu Olodumare (1961).
Fagunwa's novels draw heavily on folktale traditions and idioms, including many supernatural elements. His heroes are usually Yoruba hunters, who interact with kings, sages, and even gods in their quests. Thematically, his novels also explore the divide between the Christian beliefs of Africa's colonizers and the continent's traditional religions. Fagunwa remains the most widely read Yorùbá-language author, and a major influence on such contemporary writers as Amos Tutuola.
D. O. Fagunwa was the first Nigerian writer to employ folk philosophy in telling his stories.
Fagunwa was awarded the Margaret Wrong Prize in 1955 and was made a Member of the Order of the British Empire in 1959. He died in a river in 1963; the ground by the bank of the river apparently gave way under his feet and he fell into the river. He tried to swim out of the water but sank because the canoe by the river also fell and collapsed on him.