В лесу живёт странное существо.

Because в лесу means in the forest as a location.

After в, Russian can use:

• accusative for movement into something: в лес = into the forest
• prepositional/locative for being in something: в лесу = in the forest

So in this sentence, nothing is moving anywhere; the creature already lives there, so в лесу is correct.

This is a special form that some masculine nouns use after в and на when talking about location. It is often called the locative form.

So:

• о лесе = about the forest
• в лесу = in the forest

Both are related to the prepositional case historically, but Russian keeps this special -у form with some common nouns in place expressions.

Other examples:

• на мосту = on the bridge
• в снегу = in the snow
• в шкафу = in the wardrobe/cabinet

Because the subject is странное существо, which is singular.

Russian verbs in the present tense agree with the subject in number and, in the past tense, also in gender.

Here:

• существо = singular
• so the verb is живёт = lives

If the subject were plural, you would get:

• В лесу живут странные существа.
  Strange creatures live in the forest.

Because странное has to agree with существо.

Существо is:

• neuter
• singular
• nominative

So the adjective must also be:

• neuter
• singular
• nominative

That gives:

• странный — masculine
• странная — feminine
• странное — neuter
• странные — plural

Since существо is neuter, you need странное существо.

It is in the nominative case because it is the subject of the sentence — the thing doing the action of living.

So:

• существо = nominative singular
• живёт agrees with it

A simple way to see the structure is:

• В лесу = in the forest
• живёт = lives
• странное существо = a strange creature

Russian has no articles, so there is no direct equivalent of a or the in most sentences.

So странное существо can mean:

• a strange creature
• the strange creature

Which one is meant depends on context. In this sentence by itself, English usually translates it as a strange creature, because it sounds like new information being introduced.

Russian word order is more flexible than English word order.

Both sentences are grammatical:

• В лесу живёт странное существо.
• Странное существо живёт в лесу.

The difference is mainly emphasis and information flow.

В лесу живёт странное существо starts with the setting:
In the forest, there lives a strange creature.

It feels a bit more like scene-setting or storytelling.

Странное существо живёт в лесу starts with the subject:
A strange creature lives in the forest.

That is more straightforward.

In the present tense, Russian normally does not use есть as the equivalent of is/are in ordinary statements.

So Russian says:

• Он дома. = He is at home.
• Она врач. = She is a doctor.

In your sentence, the main verb is already живёт (lives), so nothing else is needed.

Also, Russian often avoids an extra verb where English would use there is/there are. The sentence naturally works as:

• В лесу живёт странное существо. literally something like:
• In the forest lives a strange creature.

Живёт is the 3rd person singular present tense of жить.

It means:

• lives
• is living
• dwells

In this sentence it suggests that the creature lives there / inhabits that place, not that it is merely there for a moment.

So it has a general, ongoing sense:

• A strange creature lives in the forest.

The correct pronunciation is with ё: живёт.

In many printed texts, Russian often omits the dots and writes е instead:

• живет

But it is still understood and pronounced as живёт from context.

Important points:

• ё shows the stress here: живёт
• pronunciation is roughly zhi-VYOT

For learners, it is very helpful when ё is written explicitly.

It refers to a living being, so it is typically treated as animate in meaning and in forms where animacy matters.

However, in this sentence you cannot see that directly, because:

• it is nominative singular
• animacy does not affect the nominative

You notice animacy more clearly in the accusative, especially in the plural.

For example:

• nominative plural: странные существа
• accusative plural: я вижу странных существ = I see strange creatures

So yes, существо is a good noun to remember as semantically and grammatically connected with animate reference, even though this sentence does not show the difference clearly.

Yes, that is a very natural English translation.

Depending on context, possible translations include:

• A strange creature lives in the forest.
• There is a strange creature living in the forest.
• In the forest lives a strange creature.

The Russian sentence itself does not force just one English wording. The best choice depends on style:

• plain statement: A strange creature lives in the forest.
• more atmospheric: In the forest lives a strange creature.
• more existential/introductory: There is a strange creature living in the forest.

It is perfectly normal Russian, but the word order В лесу живёт странное существо gives it a slightly narrative or scene-setting feel.

It sounds a bit like the opening of a story:

• In the forest lives a strange creature.

A more plain, everyday order would be:

• Странное существо живёт в лесу.

So the sentence is not overly poetic, but it does have a mild storytelling flavor.