"Sea of the Rivers of Story" is the English equivalent of Kathāsaritsāgara, the title of an 11th-century collection of Indian legends.
Elements of the story are indicated to have been drawn from Baum's The Wizard of Oz, Tolkien's The Lord of the Rings, and Lewis Carroll's Alice's Adventures in Wonderland.
Another obvious reference is to the stories of One Thousand and One Nights. Haroun, the son of Rashid Khalifa refers to Harun al-Rashid, a caliph who ruled from 786 to 809 and who features frequently in Thousand and One Nights stories.
"Iff the Water Genie" is a reference to the genie in "Aladdin's Magic Lamp". Haroun steals Iff's magic wrench, and as a result Iff is forced to do Haroun's bidding, just as the genie did when Aladdin came into possession of the magic lamp.
The Walrus plays off of The Beatles song, "I am the Walrus".
When the character Mudra is first encountered, the noises he emits are the gurgling sound "Gogogol" and the coughing noise "Kafkafka", as references to writers Nikolai Gogol and Franz Kafka, whose names they are distorting. Rushdie makes another reference to Kafka when Iff describes the Plentimaw Fish in the sea, who swallow stories, as hunger artists.
A reference is made to the folktale Rapunzel in the book's fourth chapter.
Haroun encounters a warrior who is fighting his own shadow. This is possibly a reference to J.M Barrie's Peter Pan.
"Goopy" and "Bagha," the names of the Plentimaws, allude to the characters Goopy and Bagha created by Bengali author Upendrakishore Ray Chowdhury. His grandson, the academy award winning director Satyajit Ray, directed two films with Goopy and Bagha as protagonists.