When the first baby laughed for the first time, the laugh broke into a million pieces, and they all went skipping about. That was the beginning of fairies.

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Notes from Wikiquote

You see, Wendy, when the first baby laughed for the first time, its laugh broke into a thousand pieces, and they all went skipping about, and that was the beginning of fairies. | J. M. Barrie, Peter & Wendy (1911), Ch. 3. | When a new baby laughs for the first time a new fairy is born, and as there are always new babies there are always new fairies. They live in nests on the tops of trees; and the mauve ones are boys and the white ones are girls, and the blue ones are just little sillies who are not sure what they are. | J. M. Barrie, Peter & Wendy (1911), Ch. 17.

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Quote text and notes from Wikiquote: J. M. Barrie (page history), available under CC BY-SA 4.0. Source quality and labels are our own summary of what Wikiquote records.