Reddit reviews The First Fossil Hunters: Paleontology in Greek and Roman Times.

While not likely the first, the ancient Greeks did discover the fossilized bones from dinosaurs and other extinct creatures. Those bones became the basis for many of the Greek mythological creatures. When the ancient Greeks found bones belonging to something they couldn't explain, they extrapolated stories of what the creature must have looked like. Griffins, Centaurs, Cyclopes... were likely dreamed up after finding dinosaur bones.

> "Skulls of Deinotherium giganteum found at other sites show it to be more primitive, and the bulk a lot more vast, than today's elephant, with an extremely large nasal opening in the center of the skull. To paleontologists today, the large hole in the center of the skull suggests a pronounced trunk. To the ancient Greeks, Deinotherium skulls could well be the foundation for their tales of the fearsome one-eyed Cyclops."

> "Most likely, the ancient Greeks found the bone in the lignite deposits of the Megalopolis basin, known in antiquity as the 'Battleground of the Giants.' There, the dense concentration of large fossil bones inspired the belief that entire armies of giants were blasted by Zeus's thunderbolts,"

Credit to Adrienne Mayor: https://en.wikipedia.org/wiki/Adrienne_Mayor

Check out the book: The First Fossil Hunters: Paleontology in Greek and Roman Times

Or these articles:
http://www.nytimes.com/2000/07/04/science/greek-myths-not-necessarily-mythical.html

http://news.nationalgeographic.com/news/2003/02/0205_030205_cyclops.html

http://www.seeker.com/prehistoric-fossil-may-have-inspired-greek-myths-1766082416.html

And this great documentary:
https://www.youtube.com/watch?v=lztrlRDRGcs

http://www.dailymotion.com/video/x1ev155_bbc-dinosaurs-myths-and-monsters-pdtv-xvid_tech

Here is a link to a book she wrote on the subject: amazon - which reviews the relationship between classical (Greek and Roman) mythology and fossils.

Some people say that the idea of the griffin came from dinosaur fossils in Mongolia. Apparently, there are mostly complete fossils in upright positions.

The First Fossil Hunters is a pretty good book on the subject.

Depending on which area the Israelites came from (Canaan, northern Egypt & Saudi Arabia, or further east towards modern day Iraq), they likely found significantly sized fossils lying on the surface of the arid lands in which they resided or traveled through.

Israel has elasmosaurus fossils (and likely other large marine animals, since Israel was the bottom of a shallow sea around 200 million years ago), http://www.jpost.com/Israel-News/Israeli-geologists-find-unprecedented-85-million-year-old-reptile-remains-390633

Northwest-central Egypt has Wadi Al-Hitan or the "Whale Valley" which is filled with Eocene whale fossils. https://en.wikipedia.org/wiki/Wadi_El_Hitan#Fossils

Saudi Arabia isn't quite as productive. It apparently lacks significant amounts of large marine fossils or dinosaurs - as far as they've discovered, at this time. http://www.thenational.ae/uae/science/why-few-dinosaur-remains-are-to-be-found-in-the-arabian-peninsula

But they do have marine fossils of corals & shells: http://afghan-arabiawild.com/Saudi%20Arabian%20Fossils%20Homepage.htm

Iraq has ichthyosaurs, living in that area during the late Jurassic: http://www.huffingtonpost.com/2013/05/16/marine-reptile-fossil-iraq-prehistoric-sea-creature_n_3281277.html

Of course these are just the fossils discovered in modern times, so there is a possibility that other significant fossils were visible in ancient times, too.

Naturally the Canaanites & Israelites would have had absolutely no clue as to what the giant bones were, which is where I suspect the legends of "giants" & "Nephilim" came from.

There used to be a fascinating documentary available on youtube about the discovery of fossils in ancient Greek temples, & the significance of those discoveries, but I'm not sure I can find that video any longer.

[edit] Ah, but I see that there is now a book by the woman who made that discovery: http://press.princeton.edu/titles/6811.html

https://www.amazon.com/First-Fossil-Hunters-Paleontology-Greek/dp/0691058636

> 4 Dinosaurs did not exist in mythology in any culture before the 1800s

So, dragons are not present in any mythology. Giants, griffons, cyclopes -- all made up after the 19th century. Sure, whatever.