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Half-Elves and Half-Orcs are the offspring of two distinct distinct species interbreeding with humans.  No magic aid or fancy explanations required to justify a non-sterile offspring.  This is usually common among species with a shared evolutionary ancestor. 

Does the connection indicate that Orcs and Elves could interbreed? Tolkien mythos indicate a racial connection.  Throw Mul into the mix and it seem that most of the core normal sized races can interbreed with humans.  Are all these races related?  Do they have a common ancestor?  Or are humans just the universal solvent of fantasy species?

I suspect that all mammalian races descend from an original slave race which was created by the mighty kobold empire.

    You know, I always figured that every birth in D&D was there because the god of death and rebirth (or of life, or any of a number of sub-categories) said it would be there.    So it isn't a matter of "Can an Elf breed with an Orc"  It's a matter of would god X bless the union of THIS elf and THIS orc with a child.    This is along the same line as Tides don't happen because of moons, they happen because the sea god makes them happen and Storms don't happen because a cold front hits a warm front but because the Storm God makes it happen.

    I always sort of liked this method because it shifts the story from biology to something like "Mother and father so desperately wanted me that they petitioned the goddess of life for a child..  and the goddess looked with favor upon their love and brought me into the world."   Or in the case of a BAD source for my character it might be "The god of Justice bore witness to what happenned in that darkenned room and called upon his sister the goddess of life to bring about the means of destruction.. not just for the one who behaved so badly but for all who sway from the path of justice."

     This can also be used as a reason why humans outbreed so many races, because the goddess of birth likes us more.    Just as people may die younger because the god of death wants to take them out of the world.

     Anyway, thats an alternative to the other thoughs listed here. 

                                                                                               Boojum the brown bunny

Perhaps they should just have pure races then let everyone take "Hybrid" as a race, and just pick two. Then we could have half-halfling, half-gnomes, half-kobolds, half-goblins. Why not, we already have half-dragons, half-elves, half-orcs, half-dwarves and half-goats. Come on, let the little people get in on the action too.