Bilbo Baggins lives in a dry, comfortable hole in the ground. Bilbo is a hobbit, a little person about half the height of an ordinary man. Hobbits have fat bellies and shoeless, hairy feet. They like food, comfort, and simple lives. Among the hobbits, Bilbo’s family is highly respected for being predictable and never having adventures—but that is about to change.

One day Bilbo is out in the sunshine smoking a pipe when Gandalf the wizard stops to talk with him. Gandalf explains that he wants to find a companion for an adventure, and Bilbo scoffs, saying that nobody in his neighborhood would agree to go along. Gandalf tells Bilbo that an adventure would be good for him. This scares Bilbo so much that he puts out his pipe and flees into his hole. He does not want to be discourteous, though, and finds himself inviting the wizard to tea the next day as he hurries inside. Gandalf laughs and makes a strange mark on Bilbo’s front door.

The next day, thirteen dwarves arrive at Bilbo’s house, each of them stepping inside and hanging up his hood just as if he had been invited. Gandalf comes too. Bilbo rushes around making tea and coffee and getting out cakes and scones for the unexpected guests. He is overwhelmed and not at all please with being imposed upon in such a way, but the dwarves all help him get out the food and clean up after they eat—except for Thorin, the leader, who is too important to do such work.

After tea, the dwarves play music and sing a song that makes Bilbo imagine leaving home and going exploring through mountains and caves. He tries to sneak away and hide, but the dwarves and Gandalf tell him to stay. Thorin gives a speech about how they will all embark the next morning on an adventure that is so dangerous they may never return. This idea upsets Bilbo so much that he faints. The dwarves carry him to the sofa in the next room, but he can still hear them talking in the parlor.

When Bilbo overhears one of the dwarves, Gloin, describe him as cowardly and “more like a grocer than a burglar,” his pride gets the best of him. He marches back into the parlor and announces that he is perfectly capable of doing anything they want him to do. Gloin protests, but Gandalf says that nobody should underestimate Bilbo:

There is a lot more in him than you guess, and a deal more than he has any idea of himself.

Gandalf gets out a map, and everyone crowds around it to see a picture of a faraway mountain called the Lonely Mountain, inside which lives a dragon that guards a great treasure. Gandalf says the dwarves have no chance of fighting and killing the dragon. It is better if they sneak in the side door and perform a burglary.

Thorin tells Bilbo that his grandfather used to be King under the Lonely Mountain (dwarves mine and build subterranean palaces). His people were rich and respected until a dragon named Smaug attacked and slaughtered their people. The few dwarves who survived have since made their livings as blacksmiths or coal miners. Smaug moved into the dwarves’ palaces and kept their immense treasure for himself.

Now Thorin and his friends want to get their treasure back. They discuss their plans until Bilbo interrupts and says that they should all go to bed if they want to get an early start. The dwarves agree. Before they go tromping off to Bilbo's spare beds, they each tell him exactly what they want for breakfast. Bilbo finds this extremely rude, and he decides not to bother to get up early to cook for them.