The White People

The White People is a horror short story written in the late 1890s by Arthur Machen. It was first published in 1904 and can be read online.

The Wikipedia article linked above says, "scholars and devotees of supernatural fiction often cite it as a classic of the genre" and offers quotes in support of the claim. The Literary Gothic says,

In the opinion of a number of critics, including yours truly, this is Machen's best work, a powerful and disturbing tale of the Celtic and primal "Little People"

Gothic.net lists the book this novella headlines as one of the "Top Ten Most Depressing Horror Books of All Time".

The photo of the author at the top of the post is from Wikipedia.