Chapters 1-40

A monk and a Daoist pick up a magic stone. Zhen Shiyin loses his house and family, and wanders off with the Daoist.

Lin Daiyu visits her relatives the Jias’, meeting the household members including matriarch Lady Jia, famed boy Jia Baoyu, who immediately upsets her. The Xue family also move in, including Baochai, whose necklace resembles Baoyu’s precious jade. Daiyu soon receives news of her father’s death, and moves in permanently.

Baoyu is shown a register of destinies in a dream. He strikes up a friendship with Qin Zhong; they are both bullied at school, making Qin’s sister ill. She dies; his father dies suddenly of shame after Qin tries to seduce a nun’s disciple, and Qin dies soon after. Meanwhile, Xifeng has cruelly led an admirer on, and he dies after a period of delerium.

Baoyu’s sister Yuanchun, an Imperial concubine, visits. A new residence and garden are constructed in her honour. Baoyu provides some of the inscriptions for the garden, which she is delighted with and names Prospect Garden.

Baoyu’s maid Aroma gets ill; he, Daiyu and Baochai develop a bickering but friendly relationship. They argue at Baochai’s birthday party; he gets drunk and composes an emotional poem, which they tease him about in the morning. On Yuanchun’s orders, Baoyu and the girls move into the Garden together, and they get closer. Baoyu and Daiyu read romances and bury flowers together by a weir, and she is upset when he spends time alone with Baochai; he notices Daiyu’s standoffishness and finds her weeping by the flowers’ grave. They work out their misunderstandings, but tensions remain.

Meanwhile, Baoyu’s half brother Huan has scalded him after he flirts with Huan’s maid. Baoyu and Xifeng suffer strange, raving illnesses, and are cured by a monk. He meets actor Jiang Yuhan at a party. Baoyu and Daiyu continue to quarrel while concealing their true emotions after Baoyu picks up a trinket for his cousin Xiangyun, and Daiyu destroys a present she has made for him. Baochai’s testiness causes the awkwardness to resurface.

Daiyu is upset to hear Baoyu bond with Aroma and Xiangyun, and Baoyu blurts out an emotional speech intended for her to Aroma. A maid who Baoyu tried to seduce has killed herself, and Jiang Yuhan goes missing. Baoyu’s father Zheng beats him senseless, stopping only after Baoyu’s mother Lady Wang makes desperate remonstrances. Aroma and Baochai tend to him; Daiyu writes a poem after he sends her some handkerchiefs, and he recuperates playing in the Garden.

Cousin Tanchun proposes a poetry club. All are enthusiastic, and arrange regular meetings after the first competition. Xiangyun and Baochai arranges a very drunken crab and cassia party and poetry competition. Country cousin Grannie Liu arrives. Baoyu sends his page in search of a temple she talks about, but he can’t find it. Grannie Liu’s rustic and uncouth ways are soundly mocked at Xiangyun’s rowdy farewell party.