"The Lagoon" is structured by Conrad as a frame story. A frame story is one in which the opening events or situations provide the framework for a narrator or a character to digress from the present moment and tell a different story, either as a personal reflection, as in Tolstoy's "The Death of Ivan Ilyich," or as a story told to the other character(s) in the story, as in "The Lagoon."

The white man whom Arsat calls Tuan sets the frame of the story "The Lagoon" and then acts as the audience while Arsat tells about his love for Diamelen and of how his brother helped him to escape with her. Before Arsat tells his story, but after the narrator has focalized the qualities of the physical surroundings through Tuan's perspective, Tuan arrives just prior to the moment at which Diamelen dies from a high fever. This is the precipitating event that leads from the frame, containing Tuan and Diamelen's death, into the story of Arsat's great love and the moral dilemma he faces as a result of that love. Incidentally, Tolstoy's "The Death of Ivan Ilyich" is also framed with a death from which the interior, or embedded, story digresses.