They are similar, but they are used in different ways. Both are something that is not real...they mean that the thing is imagined. However, a fantasy is usually an imagined story. For example, Harry Potter is a fantasy. Or, you can fantasize about something, which is thinking about something that isn't actually happening. An illusion is a trick. For example, when you watch a magic trick, a lot of those magic tricks are illusions. So, you are seeing something that is not really there.

fantasy-- is some kind of imagination ,when you imagine about some thing,people,situations etc , is called fantasy, illusion--something that deceives by producing a false or misleading impression of reality. (its like that you thinks it is but in actual its not, or you think its not and in actual it is example for fantasy--- oh if i would will one million then what i will do, example for illusion-- you thinks about some that he is a good man but in actual he is not

In addition to those dictionary definitions, I would say that fantasies are normally within your own head. You create them in your mind. Fantasies tend to be ideal, with a positive connotation. Illusions tend to be created by external/ outer things. Generally, other people and objects create illusions that work on you. You are not creating them to trick yourself. Illusions are also seen more negatively, as tricky or deceitful, or a form of lying.

Both have different meanings. In some cases, they may mean the same. Here are the meanings of the two words. fan·ta·sy noun 1. imagination, especially when extravagant and unrestrained. 2. the forming of mental images, especially wondrous or strange fancies; imaginative conceptualizing. 3. a mental image, especially when unreal or fantastic; vision: a nightmare fantasy. 4. Psychology . an imagined or conjured up sequence fulfilling a psychological need; daydream. 5. a hallucination. illusion noun 1. something that deceives by producing a false or misleading impression of reality. 2. the state or condition of being deceived; misapprehension. 3. an instance of being deceived. 4. Psychology . a perception, as of visual stimuli (optical illusion), that represents what is perceived in a way different from the way it is in reality. 5. a very thin, delicate tulle of silk or nylon having a cobwebbed appearance, for trimmings, veilings, and the like.