In 1933, the 13-year-old Ray Harryhausen saw King Kong at the cinema and was hooked – not only by Kong, who was clearly not just a man in a gorilla suit, but also by the dinosaurs. He came out of the theatre "stunned and haunted. They looked absolutely lifelike … I wanted to know how it was done." It was done by using stop-motion animation: jointed models filmed one frame at a time to simulate movement. Harryhausen, who has died aged 92, was to become the prime exponent of the technique and its combination with live action. He created the special effects for fantasy films such as The Seventh Voyage of Sinbad (1958); Jason and the Argonauts (1963), with its famous army of skeletons; and Clash of the Titans (1981).

He was born in Los Angeles to Frederick and Martha Harryhausen, Americans of German ancestry. As a young boy he had an interest in prehistoric animals and created clay models. He began to experiment with a borrowed camera, working around the fact that it did not have a stop-frame mechanism, and he showed his experiments to Willis O'Brien, who had done the visual effects for King Kong. O'Brien's verdict – that Harryhausen's models did not have any character and that he should study anatomy – was a turning point in Harryhausen's approach to his craft.

He attended Los Angeles City College and continued his experiments with a new stop-frame 16mm camera. When, in 1940, George Pal, the puppeteer film-maker, fled to Hollywood from Europe, Harryhausen showed him his work and was subsequently hired to work on Pal's Puppetoon series for Paramount alongside O'Brien. Its unjointed wooden figures did not really suit either Harryhausen or O'Brien.

Harryhausen made room to begin his dream project: Evolution of the World, a history of the planet. Surviving footage and sketches show a debt to Gustave Doré and to King Kong, but the time it would take to complete, combined with the release of Fantasia (1940) – in which the Rite of Spring sequence covered much of the same ground – stopped the project. In 1942 Harryhausen enlisted in the army, was assigned to the Signal Corps and got himself drafted into Frank Capra's unit to work on propaganda films. He also contributed to the Army-Navy Screen Magazine as an assistant photographer.

Unemployed after demobilisation in 1946, he began a series of animated two-minute fairy tales using out of date 16mm Kodak stock that he had found. Tied together with a Mother Goose prologue and epilogue, the resulting short film was successfully sold to schools and libraries.

O'Brien, who was working on Mighty Joe Young (1949), then called on Harryhausen to be his assistant. The film did not do well commercially, but O'Brien won an Oscar for the special effects. Harryhausen returned to his fairy stories, using the pseudonym Jerome Wray for his photography, and then began work on The Beast from 20,000 Fathoms (1953), inspired by Ray Bradbury's short story The Fog Horn. He devised a dynamic split-screen technique which enabled him to eradicate the then expensive system of inserting miniatures or glass paintings to combine stop-motion with live action. This process was eventually named Dynamation for the marketing campaign for The Seventh Voyage of Sinbad and subsequent films.

Ray Harryhausen poses with an enlarged model of Medusa from his 1981 film Clash of the Titans at the Myths and Legends Exhibition at the London Film Museum, 2010. Photograph: Peter Macdiarmid/Getty Images

The Beast from 20,000 Fathoms had an original budget of $65,000, which spiralled to $210,000. Warner Bros struck 500 prints in "glorious sepia tone" and, on some copies, tinted the underwater scenes green. The marketing led to the film supposedly taking more than $5m worldwide.

Harryhausen made a couple more fairytales and some TV commercials, and then met the producer Charles H Schneer and began work on It Came From Beneath the Sea (1955), the start of their lengthy collaboration. In the film a giant octopus rises from the sea to destroy the San Francisco Golden Gate bridge, though because of the expense Harryhausen reduced the number of the octopus's tentacles to six. Permission to photograph the bridge was refused in case it undermined public confidence in the structure, so stock footage was used.

On The Animal World (1956), Harryhausen worked for the last time with O'Brien before returning to work with Schneer on Earth Vs the Flying Saucers (1956). There later followed further forays into space – First Men in the Moon (1964), from the novel by HG Wells, was the only time in which Harryhausen worked in wide screen and used humans wearing suits (children in insect outfits) to avoid the endless animation.

The Seventh Voyage of Sinbad was Harryhausen's first foray into colour. It involved front and rear projection, and Sinbad's swordfight with a skeleton was considered too frightening for children by the British censor.

During the pre-production of The Three Worlds of Gulliver (1959), Harry hausen and Schneer moved to the UK, where travelling matte facilities (the technique used to combine scenes separately photographed) provided by Rank were superior to those in Hollywood.

Jason and the Argonauts had a stunning variety of creatures – Talos, the man of bronze, the Harpies and the army of skeletons among them – populating the hero's mythical quest. The Valley of Gwangi (1969) – an abandoned project which O'Brien had originally worked on for RKO – was somewhat unjustly underrated. The sequence of cowboys attempting to rope a dinosaur took five months to film.

Jason and the Argonauts and Clash of the Titans were generally accepted, including by Harryhausen himself, to be his most successful pictures, but his career is littered with many other memorable creations – among them, the space monster Ymir in 20 Million Miles to Earth (1957).

Sadly, however, Harryhausen's wonderful worlds of fantasy were rarely equalled by strong scripts or actors. He was "heartsick over some of my pictures and I could kick myself when I think of how I didn't insist on more from the director or the studio". It was only on his last film, Clash of the Titans, that his creative imagination was finally matched by the castlist, which included Laurence Olivier, as a sardonic Zeus, Maggie Smith and Claire Bloom. In 1992 he received the Gordon E Sawyer Academy Award for technical achievement. As with all film-makers he had innumerable unrealised projects, in his case Baron Munchausen and Dante's Inferno, both inspired by Doré's illustrations.

A modest and charming man with a delightful sense of humour and ineffable courtesy, Harryhausen was always good company. He published his Film Fantasy Scrapbook in 1972, dedicating it to O'Brien. It also included a preface from Bradbury, whom he had met as a teenager at the Los Angeles Science Fiction League; he was best man at Bradbury's wedding.

Harryhausen laid the groundwork for many special effects techniques today and clearly influenced, among other films, Tim Burton's The Nightmare Before Christmas (1993). His admirers include Steven Spielberg, whose special effects dinosaurs in Jurassic Park (1993) are in stark contrast to Harryhausen working alone with a small process screen, a vintage Mitchell camera, a pair of sliding matte glasses, partial miniature sets and glass paintings.

He published his autobiography, An Animated Life, in 2004. In retirement he had also returned to sculpting, and lectured and toured the world with exhibitions, culminating with one at the Academy of Motion Picture Arts and Sciences in Los Angeles and at the London Film Museum in 2010 to celebrate his 90th birthday, together with a special event at the National Film Theatre hosted by John Landis. In 2012 the documentary Ray Harryhausen: Special Effects Titan was released.

Once, when asked if he had a favourite among his creatures, Harryhausen replied: "It would be Medusa. But don't tell the others."

He married Diana Livingstone in 1962. She survives him, along with a daughter, Vanessa.

• Raymond Frederick Harryhausen, special effects creator and technician, born 29 June 1920; died 7 May 2013