I think the use of the term "race" probably comes from early Dungeons & Dragons. The original D&D had dwarf, elf, gnome, and hob^H^H^H halfling as character cl

I think the use of the term "race" probably comes from early Dungeons & Dragons. The original D&D had dwarf, elf, gnome, and hob^H^H^H halfling as character classes. It used the term "demi-humans" for these. In 1978, TSR produced "Advanced Dungeons & Dragons", the first of many attempts to clean-up and rationalize the game's basic system. It appears to me that this is where they first factored out race (i.e., [human, half-elf, elf,...]) as a separate PC characteristic. From my cursory search, Tolkien seems to have often referred to dwarves, elves, and whatnot as "peoples" and used the word "race" for different subgroups of those. He at some point wrote (in a letter, not in the stories) that that at least elves & men were able to interbreed on ocassion, and thus were technically the same species. But he was mainly interested in the drama around half-elves, and left open questions about dwarf/elf and hobbit/ent pairings for later explorers...