For more than two years now, a young shepherd named Santiago has been leading his sheep through the countryside of Spain. One night, he decides to take shelter in the ruins of an abandoned church. While preparing to sleep, he fantasizes about the daughter of a merchant he sold sheepskin to last year. Santiago is excited to see her again, having fallen in love with her in their short time together.  

Santiago reminisces about how his family originally wanted him to become a priest. He was sent to a seminary, where he studied Latin, Spanish, and theology. One afternoon, he confessed to his father that he wanted to travel the world instead. Despite his disappointment, his father had advised Santiago to become a shepherd and even gave him money to buy his flock.

The following day, Santiago stops by the town of Tarifa, where he meets with an old woman who interprets dreams. When she holds his hands and starts reciting a Gypsy prayer, Santiago’s childhood fear of Gypsies is reawakened. Despite his suspicions, he tells the woman about a recurring dream: while in a field with his sheep, a child appears and transports Santiago to the Egyptian pyramids—where treasure is buried. 

The old woman advises Santiago to go to the pyramids. She also decides not to charge him her fee if he swears to give her one-tenth of the treasure, should he find it. Santiago leaves, disappointed with such a literal interpretation of his dream. With his sheep safe at a friend’s stable, he spends the rest of the day doing errands, replenishing his wine bottle, and exchanging the book he has for a thicker one.

On a bench in the town plaza, Santiago starts reading his new book. Soon, an old man sits beside him and starts a conversation. He surprises Santiago when he declares that his book is the same as all other books in the world—it merely describes people’s inability to fulfill their own “Personal Legends.” The old man discloses the world’s greatest lie: at some point, we relinquish control over our lives to fate. 

The old man reveals himself to be Melchizedek, the King of Salem. He proposes that Santiago give him one-tenth of his sheep in exchange for help finding the hidden treasure. Santiago immediately becomes suspicious, suspecting that Melchizedek is working with the Gypsy woman to try and scam him. To quell Santiago’s doubts, Melchizedek writes in the sand the names of people in Santiago’s life: his parents and even the merchant’s daughter. 

Having proven himself to Santiago, Melchizedek reveals the one great truth of life: our strongest and innermost desires originate from the soul of the universe. Hence, human beings have but one obligation—to fulfill their own Personal Legend. Melchizedek has appeared to Santiago for this very reason, so he does not give up on his own Personal Legend. He bids Santiago to return with one-tenth of his flock tomorrow and then vanishes around the corner.