After having lived next to Gatsby's estate for several months, Nick Carraway receives an invitation to one of Gatsby's legendary parties. Carraway has been watching the preparations for these parties for some time, but has no idea about Gatsby as a person other than that he must, based on his surroundings, be very wealthy.
When he is at the party, a stranger (who turns out to be Gatsby) introduces himself—"I'm Gatsby"—and Nick is surprised by the lack of formality in his host. After Gatsby declares that he remembers having seen Carraway in France during WWI, Carraway describes his reaction to Gatsby's demeanor:
It was one of those rare smiles with a quality of eternal reassurance in it, that you may come across four or five times in life. It faced — or seemed to face — the whole external world for an instant, and then concentrated on you with an irresistible prejudice in your favor. It understood you just so far as you wanted to be understood, believed in you as you would like to believe in yourself, and assured you that it had precisely the impression of you that, at your best, you hoped to convey. (Ch. 3)
This somewhat dazzled response to Gatsby's smile—his ability to concentrate his attention on Nick as if no one else is present—instills in Carraway a predisposition to admire Gatsby scarcely diminished by the harsher realities of Gatsby that Carraway is to learn later.
The tension between what Gatsby seems to be and what he is, however, is immediately evident in Carraway's next observation as Gatsby's smile fades:
I was looking at an elegant young rough-neck, a year or two over thirty, whose elaborate formality of speech just missed being absurd.
Even though Carraway's first response is surpassingly positive, and he has no way at this point of knowing Gatsby's history, Carraway senses that Gatsby's speech is an affectation rather than a natural attribute. This realization is the seed of his fully mature view of Gatsby at the end of the novel.