The Sandman begins with three letters between the story's main character, Nathanael, his fiancée Clara, and her brother Lothar. The narrator has supposedly come upon Nathanael's story and letters through friendship with Lothar, and has decided to use these letters as a way to begin telling his story, perhaps as a way of providing primary evidence as a baseline to support the fantastic claims to come.
Letter One is from Nathanael to Lothar. Nathanael recounts in detail a traumatic event in his childhood, brought to memory by a recent interaction with a mechanic named Coppola while away at university. Nathanael says that he knows Lothar and Clara may find him childish or crazily superstitious, but that he must tell the story. Nathanael tells Lothar that though he saw little of his father, he and his brothers and sisters would gather around him after dinner; on some nights his father would tell stories and on some nights he would just sit silently, while his mother would stew in melancholy and send the children to bed early, saying that the Sandman was coming. When young Nathanael asked his mother who the Sandman was, she replied that he isn't a real person, and that the phrase simply means when one is sleepy enough that they can't keep their eyes open, as if someone has thrown sand in them. However, Nathanael was not convinced at the time, and when he asked his sister's nurse she tells him that the Sandman is a wicked man who throws sand into children's eyes to make them bleed so that he can peck them out and take them to feed to his children. Nathanael does not believe this explanation either, but he keeps the Sandman in his mind for years, fearfully contemplating the link between the Sandman's coming and his father's evening silences. At age 10, he moves to a room nearer to his father's, and on the nights that they are sent to bed early he is now able to hear footsteps down the hallway and smell strange vapors. One evening, he decides to catch a glimpse of the Sandman once and for all, and when he is sent to bed he instead hides behind a curtain in his father's room. He hears steps approach and the door open, and when he peeks from behind the curtain he sees that the Sandman was truly a man named Coppelius who sometimes ate lunch with the family.
Nathanael pauses to describe Coppelius, a man with a "beaky nose," "malicious smile," and "gnarled, hairy hands" that could make anything they touched seem disgusting. According to Nathanael, Coppelius realized that he was able to affect the children of the family in this way, and purposefully touched their food at shared meals; Nathanael reports that his mother seemed to likewise feel coldly toward the man while his father always made sure Coppelius had whatever he wanted to eat or drink and had the children keep completely silent in his presence. On realizing that the Sandman is not exactly a monster who brings eyes to feed his children but, in fact, this differently horrifying man, he is rooted in place with his head poking through the curtains. As he watches, Coppelius and his father put on long, black smocks, start a fire in the hearth, and take out strange instruments. His father lifts lumps with tongs and then hammers them, looking ghoulish in the firelight. Coppelius calls for his father to "Bring the eyes!" and Nathanael is so gripped by terror that he screams out and reveals himself. Coppelius throws him partially into the fireplace, whispering, "Now we've got eyes," but Nathanael's father implores that he let his son keep his eyes. Coppelius concedes, but says that he will still examine the mechanism of Nathanael's hands and feet, dislocating them and sending Nathanael into a faint. Nathanael writes that when he awoke, Coppelius had left town, but he returned a year later. His father promises the family that this is the last time, but that night there is an explosion and his father dies with a twisted, burnt face. After this, Coppelius vanishes from the town again, this time seemingly for good. Nathanael ties the story from childhood to the point of his writing to Lothar, explaining that the man, Coppola, must actually be the same Coppelius as they have the same features. He ends his letter by saying that he is determined to avenge the death of his father, also imploring Lothar not to tell his mother of this man's supposed re-appearance and to give his love to Clara.
Letter Two is from Clara to Nathanael. It seems that he mistakenly addressed the previous letter to her, though the contents were clearly for her brother. She reads it anyway and is quite disturbed, though Nathanael typically sees her as possessing too much "womanly calm." She tells him that she has spoken to Lothar about his letter and that her brother has convinced her that it was a construction of childish fantasy. Lothar believes that Nathanael's father and Coppelius were practicing alchemy together, which would account for the nighttime meetings and strange vapors, the explosion that caused his father's death, and even his mother's dissatisfaction (since alchemy is a costly pursuit). She encourages him to forget both Coppelius and Coppola and believe that the only person with power over him is himself.
Letter Three is from Nathanael to Lothar, and is quite short. He says that he is annoyed Clara read their letter and implores his brother-in-law-to-be to stop lecturing her on the philosophy that led her to write the things that she did. However, he acknowledges that it seems Coppola is not Coppelius because a new professor, an Italian named Spalanzani, who has joined the university has told him that he has known Coppola for years and that the mechanic is Piedmontese (while Coppelius was, supposedly, German). Nathanael says that he is not totally at ease, but that Coppola has now left town. He finishes his letter by mentioning that he saw a woman, who turns out to by Spalanzani's daughter Olimpia, through a glass door near the lecture hall; he says she was very beautiful but seemed lifeless as if she was asleep with her eyes open. He again sends his best wishes to Clara, promising to write directly to her later.
In this section, the narrator has not yet introduced himself, so the reader is plunged directly into the relationships between Nathanael, Clara, and Lothar. The reader, like Clara and Lothar, must decide for themselves what to believe about the veracity of Nathanael's childhood tale, without guidance or opinion from a narrator. The reader also directly witnesses the strain between Nathanael and Clara, resulting in Nathanael's talking to her solely through Lothar during this stretch of correspondence, though he uses these opportunities to express his love for her.
A comparison of thoughts that are childish versus adult is begun and will progress throughout the story. This question is central to fantasies for non-child readerships, like the fantasy and horror short stories that Hoffmann specializes in. From the beginning, we see that Nathanael has carried fears from childhood into his adult wife, and Clara and Lothar chastise him for this, and for having too active an imagination for an adult. This issue clouds the story, making it confusing for the reader whether Nathanael truly needs to stop perceiving things in a fearful, childish manner or whether his suspicions are justified.
A contemplation of what things are scary, and the formation of fear, is also undertaken. Nathanael gets different ideas of what the mysterious figure of The Sandman might be - a harmless phrase, a terrifying beaked monster, a mortal man who takes pleasure in children's discomfort, or perhaps a shadowy mix of all three and more. What is scary to children and adults is necessarily an issue to an author like Hoffmann, and it is as if he is allowing The Sandman to morph along with Nathanael's sensibilities as he grows.
In these letters, the reader begins to pick up the theme of men and women's stilted and strange behavior together. This will be taken much further by the parodied interactions between Nathanael and Olimpia (beginning with his first critical gaze upon her from afar, mentioned in the third letter), but can be seen from Nathanael's distant and even disdainful behavior regarding Clara and his memories of the strain between his parents caused by his father's relationship with Coppelius.
The imagery of eyes that permeates the story is begun from early in the first letter, and is obviously an area of great fear to Nathanael and therefore great intrigue to Hoffmann. As will Hoffmann will continue to develop later, the eyes may reveal something of one's soul, enough to reveal whether one is truly living or not. However, our own eyes and the features of others can be blurred by perception; thus, Nathanael is able to watch Olimpia's eyes falsely light up when he convinces himself she is alive. We may also skew our perceptions to see others as physically similar to those they resemble internally, as happens with Nathanael's father looking like Coppelius when performing alchemy with him. Perhaps even the grotesque description of Coppelius's appearance was skewed by Nathanael's beliefs about The Sandman, making the old man appear more beaked and terrifying than in reality. Because his description comes only from Nathanael, the reader is at the mercy of his perception.