"The Story of the Stone" is the first volume of a five volume series that tells the story of the prestigious Chinese Jia family. The main story line follows the growing up years of cousins Bao-yu, Dai-yu, and Bao-chai and charts the developing love triangle between these three main characters. Through his novel, Cao Xueqin also attempts to describe the lifestyle of this wealthy Chinese family. This story is told against the backdrop of a fictional magical stone that has been brought to life in the character of the mischievous boy Bao-yu.

As is mentioned in the first chapter, "The Story of the Stone" is primarily a love story. Although are various love affairs mentioned throughout the book, the main love story is that between Bao-yu and Dai-yu. Although it is unknown to them the two knew each other in the Land of Illusion before they were transformed into mortal human beings. Bao-yu, the stone, watered Dai-yu, Crimson Pearl Flower, with dew so that she was able to assume the form of a girl. Crimson Pearl Flower, however, is unable to find any way to repay Bao-yu for his act of love. She mentions it would take a whole lifetime of mortal tears to repay his kindness. Therefore, each time Dai-yu cries in the novel, it is symbolic of her repaying Bao-yu for his gift of life.

Once they become mortal humans, however, Bao-yu and Dai-yu's fates become more complicated. They have another cousin, Bao-chai, who is constantly causing grief for Dai-yu. Dai-yu compares herself with Bao-chai and believes she is inferior to Bao-chai's beauty and charms. In fact, it is noted in Bao-yu's dream that he will marry Bao-yu and not Dai-yu. The novel ends with Dai-yu crying outside Bao-yu's house because a misunderstanding has caused her to be left out of a gathering.

While following this main love story, Xueqin also shares the beauty and ease of life for this wealthy family. He describes parties where no expense is spared and funerals that last for months. Descriptions of medical practices of the wealthy Chinese are also included in the narrative as well as the relationships between family members, servants, and children. In addition, the family builds an elaborate separate residence for their daughter who has been chosen as an Imperial Concubine.

Throughout the novel, however, there are hints that all is not well with the Jia family. It seems not only the family's monetary wealth is diminishing, they are also lacking in good male heirs. Since Bao-yu is the next in line after the death of his father, this makes him doubly important to the Jias and their future.