The classic children's character known for living in a candy house is Hansel from the fairy tale "Hansel and Gretel," collected by the Brothers Grimm. In the story, Hansel and his sister Gretel come across a witch's house made entirely of sweets and confections while wandering in the woods. The house, adorned with candy and baked goods, symbolizes temptation and the dangers that can come from succumbing to it. Their encounter with the witch leads to a thrilling adventure, emphasizing themes of cleverness, sibling bonds, and the triumph of good over evil, making it a lasting tale in children's literature.