In chapter 4 of the Biographia Literaria, Samuel Taylor Coleridge remarks on the distinction between fancy and imagination in the context of his attempts to understand and evaluate the works of Wordsworth:

Repeated meditations led me first to suspect ... that Fancy and Imagination were two distinct and widely different faculties, instead of being, according to the general belief, either two names with one meaning, or, at furthest, the lower and higher degree of one and the same power.

Coleridge begins by referring to Milton as an example of an imaginative mind and Cowley as an instance of a fanciful one. The latter is an accomplished versifier, highly adept in the art of arranging words and thoughts into pleasing patterns. The former, however, is a creative genius, with abilities that are literally divine, since creation ex nihilo is commonly regarded as the prerogative of God.

Coleridge criticizes Wordsworth for confusing the godlike faculty of imagination with mere fancy. He thinks Wordsworth makes this mistake because the two are often present together, but he points out that:

A man may work with two very different tools at the same moment; each has its share in the work, but the work effected by each is distinct and different.

Indeed, it is likely that a great poet will have both fancy and imagination, though only the latter is essential to his greatness.

Coleridge further divides imagination into primary and secondary categories. The primary imagination he identifies as "the living power and prime agent of all human perception," while secondary imagination is an echo of this which is specific to the artist and which "dissolves, diffuses, dissipates, in order to recreate." Fancy, in contrast to both these types of imagination, is simply "a mode of memory emancipated from the order of time and space."