Dragons are inspired by the reptiles in the crocodilian family. This comprises of the alligators, crocodiles, caimans, and ghareals. When Europeans went to Africa and saw the huge Nile crocodiles, they came up with the myth of dragons when describing to other fellow Europeans. The early drawings seem to represent the real crocodiles, but later, people started adding wings, and so forth, and pretty soon they were breathing fire!
[laugh!] The Chinese also have myths and legends involving dragons, no surprise, because Chinese alligators (a very closed cousins of the American alligators) were once wide spread throughout China. They were hunted to the brink of extinction, but are now being extensively bred in captivities, in China. And crocs are also very common in South and Southeast Asia, which come in different species and size (ranging from the gigantic salt water crocodiles to the mean man-eating Indian muggers and Siamese crocodiles).