Did God create evil?
The best answer is yes and no. Evil, by definition, is that which is contrary to God's nature or character. These are revealed to us in His law; thus that which does not conform to God's moral laws is evil.
One can say, yes, because evil is not possible unless God makes it possible through the creation of a moral being. Evil, though, is not a direct creation of God. God created beings that could choose to reflect His nature and character or not. Evil is the description of that character and nature which is other than God. It has no existence until someone chooses to display it in his life.
Though it would probably be incorrect to say that Satan created evil, he is the first known being to choose to display evil in his life. It would perhaps be better to say he fathered evil (Jas. 1:13-15).