Decide what kind of fantasy story you want to write. Some fantasy is based on a completely fabricated world, while other stories take place in a version of the modern world in which magic or supernatural elements exist. Fantasy tales that take place in historical settings take the most work, as they require a lot of research.
Plan out your world. Write down as many details as you can think of to describe it. Some of the most important questions to answer are what technologies exist; what the political structure of society is; what cultures exist and what values and beliefs they have; whether there are any ongoing wars or struggles; and whether magic exists and, if so, how it works.
Write a character sketch for your protagonist. Describe your character's appearance, personality, goals and current situation as you might describe a friend. Make the sketch about one or two pages long and as vivid as possible.
Write short sketches for your other characters. Give each anywhere from a couple sentences to a few paragraphs. Describe what is important about each of them.
Write a plot synopsis. Record all of the important events in your story in an outline form. Don't worry about making it too detailed.
Write a first draft. If it is a short fantasy story, try to write it all in one sitting. Don't worry about getting everything perfect. The most important thing is to get through the first draft.
Let the story sit for a while. It is natural to want to dive right back in and begin to rewrite it, but it is important to get some distance before you start to revise. This step can take anywhere from a few days to a few months. With long pieces, it sometimes takes even longer.
Go back and read the story through. Does everything in it make sense? Try to see the story from the perspective of a reader who knows nothing about it other than what you have written.
Rewrite the story for consistency, flow and organization. Don't stress over every word, but make sure that the story as a whole makes sense and is enjoyable to read, and the story is well developed.
Rewrite one final time. In this rewrite, you want to be aware of your voice as a writer. Make sure that the whole thing is written in the same style and that the style goes along well with what you are saying. Also check your grammar and punctuation.