The novel, written by Dai Sijie, is about two teenagers. Luo, "a genius for storytelling", and an unnamed narrator, "a fine musician" are sent to be re-educated during the Chinese Cultural Revolution. They are sent to a mountain called "Phoenix of the Sky" near Tibet, because their doctor parents have been declared enemies of the state and "reactionaries of the bourgeoisie" by the Communist state. There, while forced to work in the coal mines and with the rice crop, they are captivated by and fall in love with the daughter of the local tailor, the Little Seamstress. Throughout the novel, the small farming village of Phoenix of the Sky delights in the storytelling of the two teenagers. They even are excused from work for a few days to see films at Yong Jing, a nearby town, and later relate the story to the townspeople, through an activity known as "oral cinema", where the story is retold. 
At the same time, they meet Four-Eyes, the son of a prominent poet, who also is being re-educated. Although he is succeeding in re-education, he is also hiding French, Russian, and English novels that are forbidden by Chinese law. The boys convince Four-Eyes to lend them the book, Ursule Mirouët by Honoré de Balzac. After Luo stays up all night reading the book, he gives the book to the narrator and leaves the village in order to tell it to the Little Seamstress, "the region's reigning beauty" that both characters are attracted to, and the narrator becomes "completely wrapped up in the French story". When Luo returns, he is carrying leaves from the tree below where he and former virgin, the Little Seamstress, had sex.
The character of Luo is then motivated to educate the Little Seamstress and "make her more refined, more cultured". This motivation spurs the narrator and Luo to steal the rest of the books from Four-Eyes’ home, "knowing that [Four-Eyes] will be afraid to call the authorities". Particularly inspirational to the narrator is the translation by Fu Lei of Romain Rolland's Jean-Christophe, which the narrator credits as giving him a newfound sense of individualism. Luo and the Seamstress's romantic relationship grows as the narrator silently and jealously watches. After their successful robbery, the narrator recites the tale of The Count of Monte Cristo in his cabin to Luo and the visiting tailor.
The village headman, described as a passionate Communist who has just returned from an unsuccessful dental surgery, threatens to turn in Luo and the narrator for spreading the counter-revolutionary ideas found in The Count of Monte Cristo if they don’t agree to fix the headman’s teeth. Faced with the threat of prison, the pair fix the village headman's teeth, but they operate the drill “slowly... to punish him.” Later, when the headman is calmer and thankful to the two for repairing his teeth, he allows Luo to leave the village for a month to look after Luo’s ailing mother. During Luo’s absence, the Little Seamstress concludes that she is pregnant. Her character confides this in the narrator, for "when [Luo] had left the previous month she was not yet worried" about missing her period. However, since it is illegal to have children out of wedlock in the revolutionary society, and she and Luo are too young to marry, the narrator must set up a secret abortion.
Three months after the abortion is performed and Luo returns, the pair's mission of educating the Little Seamstress backfires. At first, however, it seems as if their plan is working perfectly – she adopts the city accent and begins making modern clothing. Yet, one day, she "comes to understand her own sexual power", and leaves without saying farewell. In his grief, Luo becomes inebriated and burns all of the foreign books "in [a] frenzy," ending the novel.