I've tackled a similar question before here. To expand on that answer a little: essentially, we do know that ancient peoples occasionally found fossils (usually remains of mammals from the last ice age, not dinosaur fossils). In Ancient Greece, these remains were sometimes considered the bones of ancient heroes like Hercules and worshiped; in ancient China, they were sometimes called "dragon bones" and used in traditional medicine. As I write in my other post, for several reasons it is extremely unlikely that these remains are the source of dragon myths; however, when peoples found things they recognized as buried bones, they do seem to have related them to their own mythology. So people who already had myths of dragons, upon finding a giant bone, may have decided it was the bone of a dragon.

The key point for your question in particular is that it was only in the 1800s when dinosaur fossils were found and recognized for what they were, and the reason for that is simple: paleontology is a very difficult science, and it took a long time to develop. Fossil bones are usually fragmentary and often distorted, so the first paleontologists needed to have a very deep knowledge of modern animal anatomy to understand the fossils that were found in the rock. So any dinosaur fossils found early in human history would have been impossible to recognize for what they were.

See here for a sampling of threads on this very common question.