The cryptoterrestrial hypothesis proposes that reports of flying saucers or UFOs are evidence of a hidden, Earth-based, technologically advanced civilization.

Aaron John Gulyas, a scholar of conspiracy theories, characterized the so-called hypothesis as "really more of a thought experiment designed to raise questions", while others note that "even people open to the cryptoterrestrial hypothesis remain skeptical". In 2024, authors in a philosophy journal described the cryptoterrestrial hypothesis as a suggestion that "sounds absolutely crazy".

During the late 19th century, a variety of authors promoted ideas of an undiscovered superior civilization, variously located in mythical places such as Shambhala, Atlantis, Lemuria, or inside a Hollow Earth. In 1864, Jules Verne's novel Journey to the Center of the Earth imagined a hidden world beneath the Earth's surface. In 1871, the novel The Coming Race was published anonymously; it discussed a subterranean superhuman race with psionic powers. In subsequent years, Theosophy founder Helena Blavatsky spread tales of superhuman masters hidden in the mountains of Tibet. In the ensuing decades, occultists alleged the existence of secret superhuman societies in a variety of mythical places including Shambhala, Atlantis, Thule, Hyperborea, Mu, Lemuria, or even the interior of a Hollow Earth.

In his 1895 novel The Time Machine, H.G. Wells wrote about Morlocks, a hidden, subterranean race of technological humanoids who feed on helpless surface-dwellers. The 1933 novel Lost Horizon and its 1937 film adaptation depict Shangri-La, a Tibetan paradise inhabited by peaceful, nearly-immortal people. The 1935 serial The Phantom Empire starred Gene Autry as a singing cowboy who stumbles upon an ancient subterranean civilization living beneath his own ranch.

During the mid-1940s, an obscure sub-culture developed around the science-fiction magazine Amazing Stories and its tales of Richard Sharpe Shaver, which were presented as a non-fictional account from "a simple man, a worker in metal, employed in a steel mill in Pennsylvania". Since 1945, the magazine had published Shaver's claims to be in communication with subterranean beings concerned about atomic pollution who piloted disc-shaped craft.

In the October 1947 issue of Amazing Stories, editor Raymond Palmer argued the flying disc flap was proof of Richard Sharpe Shaver's claims. That same issue carried a letter from Shaver in which he argued the truth behind the discs would remain a secret. Shaver wrote:

The discs can be a space invasion, a secret new army plane – or a scouting trip by an enemy country…OR, they can be Shaver's space ships, taking off and landing regularly on earth for centuries past, and seen today as they have always been – as a mystery. They could be leaving earth with cargos of wonder-mech that to us would mean emancipation from a great many of our worst troubles— and we'll never see those cargos…I predict that nothing more will be seen, and the truth of what the strange disc ships really are will never be disclosed to the common people. We just don't count to the people who do know about such things. It isn't necessary to tell us anything.

After Shaver's death in 1975, his editor Raymond Palmer admitted that "Shaver had spent eight years not in the Cavern World, but in a mental institution" being treated for paranoid schizophrenia.