The Collaborative International Dictionary of English v.0.48:

folktale \folktale\, folk tale \folk tale\n.
   a tale circulated by word of mouth among the common folk,
   especially one forming part of the tradition of a culture.
   [WordNet 1.5 +PJC]

WordNet (r) 3.0 (2006):

folktale
    n 1: a tale circulated by word of mouth among the common folk
         [syn: folktale, folk tale]

Moby Thesaurus II by Grady Ward, 1.0:

53 Moby Thesaurus words for "folktale":
   Marchen, Mishnah, Spiritus Mundi, Sunna, Talmud, Western,
   Western story, Westerner, adventure story, allegory,
   ancient wisdom, apologue, archetypal myth, archetypal pattern,
   bedtime story, common law, custom, detective story, fable, fabliau,
   fairy tale, fantasy, fiction, folk motif, folk story, folklore,
   gest, ghost story, horse opera, immemorial usage, legend, lore,
   love story, mystery, mystery story, myth, mythology, mythos,
   nursery tale, parable, racial memory, romance, science fiction,
   shocker, space fiction, space opera, suspense story, thriller,
   tradition, traditionalism, traditionality, whodunit,
   work of fiction