The Alchemist follows the journey of an Andalusian (southern Spanish) shepherd boy named Santiago. Believing a recurring dream to be prophetic, Santiago decides to travel to a Romani fortune-teller in a nearby town to discover its meaning. A gypsy woman tells him that there is a treasure in the Pyramids in Egypt.

Early into his journey, he meets an old king, whose name was Melchizedek, who tells him to sell his sheep to travel to Egypt and introduces the idea of a Personal Legend (which is always capitalized in the book). Your Personal Legend "is what you have always wanted to accomplish. Everyone, when they are young, knows what their Personal Legend is." He adds that "when you want something, all the universe conspires in helping you to achieve it.