A reporter, inspired by the feverish gossip about Gatsby circulating in New York, comes to West Egg in hopes of obtaining the true story of his past from him. Though Gatsby himself turns the man away, Nick interrupts the narrative to relate Gatsby's past (the truth of which he only learned much later) to the reader.
His real name is James Gatz, and he was born to an impoverished farmer in North Dakota, rather than into wealth in San Francisco, as he claimed. He had his named legally changed to Jay Gatsby at the age of seventeen. Though he did attend St Olaf's, a small college in Minnesota, he dropped out after two weeks, as he could not bear working as a janitor in order to pay his tuition. Gatsby's dreams of self-improvement were only intensified by his relationship with Dan Cody, a man whom he met while working as a fisherman on Lake Superior. Cody was then fifty, a self-made millionaire who had made his fortune during the Yukon gold rush. Cody took Gatsby in and made the young man his personal assistant. On their subsequent voyages to the West Indies and the Barbary Coast, Gatsby became even more passionately covetous of wealth and privilege. When Cody died, Gatsby inherited $25,000; he was unable to claim it, however, due to the malicious intervention of Cody's mistress, Ella Kaye. Afterward, Gatsby vowed to become a success in his own right.
Several weeks pass without Nick's seeing Gatsby. Upon visiting Gatsby at his mansion, Nick is shocked to find Tom Buchanan there. Tom has unexpectedly stopped for a drink at Gatsby's after an afternoon of horseback riding; he is accompanied by Mr. and Mrs. Sloane, an insufferable East Egg couple who exemplify everything that is repellent about the "old rich." Gatsby invites the group to supper, but Mrs. Sloane hastily refuses; perhaps ashamed of her own rudeness, she then half-heartedly offers Gatsby and Nick an invitation to dine at her home. Nick, recognizing the insincerity of her offer, declines; Gatsby accepts, though it is unclear whether his gesture is truly oblivious or defiant.
Tom pointedly complains about the crazy people that Daisy meets, presumably referring to Gatsby. Throughout the awkward afternoon, he is contemptuous of Gatsby, particularly mocking his acceptance of Mrs. Sloane's disingenuous invitation.
The following Saturday, Tom and Daisy attend one of Gatsby's parties. Tom, predictably, is unpleasant and rude throughout the evening. After the Buchanans leave, Gatsby is crestfallen at the thought that Daisy did not have a good time; he does not yet know that Tom badly upset her by telling her that Gatsby made his fortune in bootlegging.
Nick realizes that Gatsby wants Daisy to tell Tom that she has never loved him. Nick gently informs Gatsby that he cannot ask too much of Daisy, and says, "You can't repeat the past." Gatsby spiritedly replies: "Of course you can!"
Nick begins the story of Gatsby's past by saying that Gatsby "sprang from his Platonic conception of himself," which refers to that his ideal form. That is, the Platonic form of an object is the perfect form of that object. Therefore, Nick is suggesting that Gatsby has modeled himself on an idealized version of "Jay Gatsby": he is striving to be the man he envisions in his fondest dreams of himself. Gatsby is thus the novel's representative of the American Dream, and the story of his youth borrows on one of that dream's oldest myths: that of the self-made man. In changing his name from James Gatz to Jay Gatsby, he attempts to remake himself on his own terms; Gatsby wishes to be reborn as the aristocrat he feels himself to be.
It is significant that Gatsby leaves college because he finds his work as a janitor degrading. This seems a perverse decision, given the fact that a university education would dramatically improve his social standing. His decision to leave reveals Gatsby's extreme sensitivity to class, and to the fact of his own poverty; from his childhood onward, he longs for wealth and for the sophistication and elegance which he imagines that wealth will lend him. His work as a janitor is a gross humiliation because it is at odds with his ideal of himself; to protect that ideal, he is willing to damage his actual circumstances.
Fitzgerald uses the character of Dan Cody to subtly suggest that the America of the 1920s is no longer a place where self-made men can thrive. Cody, like Gatsby, transcended early hardship to become a millionaire. Like Gatsby, he is remarkably generous to his friends and subordinates. Cody takes to drinking because, despite his wealth, he remains unable to carve out a place for himself in the world of 1920s America. It is important to note that Cody's death is brought about, at least in part, through the treachery of the woman he loves; this foreshadows the circumstances of Gatsby's death in Chapter VIII.
The painfully awkward luncheon party at Gatsby's mansion underlines the hostility of the American 1920s toward the figure of the self-made man. Both the Sloanes and Tom Buchanan treat Gatsby with contempt and condescension, because he is not of the long-standing American upper class. Though Gatsby is fabulously wealthy, perhaps wealthier than Tom himself, he is still regarded as socially inferior. For Fitzgerald, nothing could be more inimical to the original ideals of America. The first Americans fought to escape the tyrannies of the European nobility; Tom Buchanan longs to reproduce them.
This chapter makes it clear that Daisy, too, is a part of the same narrow-minded aristocracy that produced her husband. For Gatsby, she became the symbol of everything that he wanted to possess: she is the epitome of wealth and sophistication. Though Gatsby loves this quality in Daisy, it is precisely because she is an aristocrat that she cannot possibly fulfill his dreams. She would never sacrifice her own class status in order to be with him. Her love for him pales in comparison to her love of privilege.