"faculty of making happy and unexpected discoveries," a rare word before 20c., coined by Horace Walpole in a letter to Horace Mann dated Jan. 28, 1754, but which apparently was not published until 1833.
Walpole said he formed the word from the Persian fairy tale "The Three Princes of Serendip" (an English version was published in 1722) whose heroes "were always making discoveries, by accidents and sagacity, of things they were not in quest of" [Walpole].
Serendip, (also Serendib), attested by 1708 in English, is an old name for Ceylon (modern Sri Lanka), from Arabic Sarandib, from Sanskrit Simhaladvipa "Dwelling-Place-of-Lions Island."
Attention was called to the word in an article in The Saturday Review of June 16, 1877 ["An ungrateful world has probably almost forgotten Horace Walpole's attempt to enrich the English language with the term "Serendipity." etc.]; it begins to turn up in publication 1890s but still is not in Century Dictionary (1902) .