Fabulous bird raised, literally, on an island (7)
I believe the answer is:
corsica
'island' is the definition.
(Corsica is an example)
'fabulous bird raised literally on an' is the wordplay.
'fabulous bird' becomes 'roc' (I've seen this before).
'raised' shows that the letters should be reversed in order.
'literally' becomes 'sic' (shows an error has been quoted word-for-word).
'on' means one lot of letters go next to another.
'an' becomes 'a'.
'roc' reversed gives 'cor'.
'cor'+'sic'+'a'='CORSICA'
(Other definitions for corsica that I've seen before include "French island in Med" , "Island north of Sardinia" , "Napoleon's island birthplace" , "Island N. of Sardinia" , "Napoleon Bonaparte was born on this French island" .)