We meet our main character Santiago, a young shepard in Andalusia, Spain. Santiago is headed toward a village to sell wool to a merchant and meet up with a girl he likes.
Santiago has been having a reoccuring dream so he decides to look to a gypsy for guidance. She tell him that his dream means that he is to find treasure near the Egyptian Pyramids.
Santiago sits down on a bench to read when an old man approaches him and begins talking to Santiago. The old man explains that he is a great king and that he wants Santiago to pursue this treasure.
Santiago decides to go for the treasure and sells his sheep. Some of his sheep go to the old man, who in turn gives Santiago the Urim and Thummim and advice to follow the omens.
Santiago makes his way through Africa and finds a boy like him who can speak Spanish. Santiago places his trust in this boy, but he steals all of Santiago's money when Santiago gets distracted by a sword in the market.
Santiago finds a crystal shop and offers to help the owner clean glasses in exchange for food. The crystal merchant offers Santiago a job and Santiago agrees, deciding to use the money to buy sheep and become a shepard again.