The basic storyline of A Dream of Red Mansions focuses primarily on the Chia family. There are two dukes in the family — Duke Ning-kuo and Duke Jung-kuo. Chia Fu, the elder grandson of Duke Ning-kuo, dies young, so the second grandson, Chia Ching, succeeds to the title after the death of his father, Chia Tai-hua. However, since his heart is set on a religious life, he relinquishes his title to his son, Chia Chen, and devotes his time and energy to religious study, hoping to become an immortal after death.
Unlike his father, Chia Chen is a libertine, indulging himself in a lecherous lifestyle. For example, he has an illicit affair with his son's wife, Chin Ko-ching.
Duke Jung-kuo's son Chia Tai-shan marries the daughter of Marquis Shih of Chinling (Duchess Chia née Shih, Lady Dowager). They have two sons, Chia Sheh and Chia Cheng, and a daughter, Chia Min. Chia Sheh has a son, Chia Lien, whose wife is Wang Hsi-feng , and their daughter is Chiao-chieh. Chia Sheh has a daughter, Ying-chun, by a concubine.
Chia Cheng marries Lady Wang, and they have two sons, Chia Chu and Chia Pao-yu, and a daughter, Tan-chun (by concubine Lady Chao). Chia Chu dies young, leaving his wife, Li Wan, and his son, Chia Lan, behind. Chia Pao-yu is born with a piece of precious jade in his mouth — the Jade of Spiritual Understanding.
Chia Min is married to Lin Ju-hai, but dies young, leaving a daughter, Lin Tai-yu, with her father, Lin Juhai. Upon her grandmother Lady Dowager's invitation, Tai-yu comes to live with the Chia family. Lady Dowager dotes on both Pao-yu and Tai-yu.
As the Chia family is a wealthy and powerful, aristocratic family and the household is a vast one, Aunt Hsueh and her daughter, Hsueh Pao-chai, come to join the household. Pao-yu, in his innocent and naive fashion, loves both girls equally, although his strongest attachment is to Tai-yu.
When Pao-yu's sister Yuan-chun is chosen as an Imperial concubine (Imperial Consort), the Chia family grows even more affluent and influential. They build Grand View Garden (Ta-kuan Garden) to honor and entertain Yuan-chun when she comes back for a visit; it is a vast, beautiful setting where the whole family can dine together in great happiness.
Pao-yu clearly has a preference for feminine company and spends most of his time with his girl cousins and young maid-servants, such as Hsi-jen, Chin-wen, Tzu-chuan, and Hsueh-yen. Not surprisingly, his father, Chia Cheng, is very strict with him and often criticizes him for spending so much time with the girls instead of studying the classic works that he will be tested on during the all-important official examination. Pao-yu, however, is a rebellious character. Contrary to feudal ethics, he isn't interested in an official career. What he cares for most is playing freely with innocent girls and writing poems while yearning for the freedom to love and marry whomever he chooses.
Because of the concept of feudal fatalism, the Chia authorities — represented by Lady Dowager, Chia Cheng, Lady Wang, and Wang Hsi-feng — decide to choose Pao-chai as Pao-yu's bride — instead of the lovely, but sickly (and rebellious) Tai-yu. In their opinion, Pao-yu and Pao-chai are a perfect couple. Their marriage will be a symbolic union between a "precious jade" and a golden locket." Therefore, when they become aware of the fact that Pao-yu deeply loves Tai-yu, they decide to play a cruel trick on him. They tell him that he will be married to Lin Tai-yu; secretly, though, they plan to have him marry the heavily veiled Pao-chai. Unfortunately, the secret is leaked to Tai-yu, and she falls unconscious and begins spitting blood.
On Pao-yu's wedding day, Lin Tai-yu is left alone — sick in bed, accompanied only by Tzu-chuan. She breathes her last in loneliness, grief, and hatred, while Pao-yu goes merrily to the wedding ceremony, assuming that his bride will be Lin Tai-yu. When he finds himself married to Hsueh Pao-chai, he goes out of his mind.
Meanwhile, the Imperial concubine dies and Chia Sheh is deprived of his rank for conspiring with provincial officials to take advantage of the weak. His properties are confiscated, and the house of Chia Cheng is involved. The grandmother dies, the nun Miao-yu is kidnapped, Wang Hsi-feng loses authority and dies in regret and with a guilty conscience.
Pao-yu's illness grows worse until he is on the point of death — when suddenly a monk appears with Pao-yu's lost jade. Momentarily, Pao-yu seems to be himself again, but suddenly he faints away again at the sight of the monk and regains consciousness only after a terrible nightmare.
Pao-yu then changes his ways and determines to restore the reputation of his house. The following day, he takes the official examination, placing seventh on the list. Pao-yu's wife, Pao-chai, is pregnant, but nonetheless, he suddenly decides to leave her and disappears after the examination.
Chin Cheng, on his way back to Peking after attending his mother's funeral in Nanking, stays at Piling Station one snowy night, and there he sees a man with a shaved head, bare feet, and wearing a red woolen cape. The man bows to him and, on close inspection, he recognizes Pao-yu. Before Chia Cheng can speak to him, though, a Buddhist monk and a Taoist take Pao-yu away. Chia Cheng runs after them, but they have vanished, and all he can see is a stretch of snowy waste. That is the main thread of the story.
The narrative itself is based on the prediction in Pao-yu's dream, years ago, when Pao-yu found himself in a fairyland, where he met a goddess and was shown the register of the Twelve Beauties of Chinling. He saw pictures and poems which he could not understand. The Goddess ordered her maids to sing twelve songs, the last of which runs as follows: The high official's fortunes will decline; the rich man's gold and silver will melt away; the kind of heart will escape death; the heartless will receive their just deserts; he who takes life will pay with his own life; he who causes tears will weep till his eyes are dry; one who sees through this world will enter holy orders; one enslaved by love will die a fruitless death; when all food is gone, birds will fly to the woods, leaving nothing but bare, naked earth behind.
The story line of the novel roughly parallels these predictions. The outward magnificence of the Chia family cannot disguise its decline and deterioration forever. The Chia family members are accustomed to living in luxury, and certain parasitic landowners (such as Chin Sheh and Chin Chen) are nothing but dissolute and dissipated people. In order to enjoy a life of extravagance, they put increasing pressure on the peasants and extract heavy taxes from their tenants. Relying on their wealth and political influence, they bully innocent citizens and maids (such as Hsueh Pan and Wang Hsi-feng ) by contemptible and cruel methods. Therefore, tragedy begins to overshadow the family's splendor.
There are many conflicts undermining the network of this enormous household — conflicts between masters and servants, between wives and concubines, between lineal descendants and sons and daughters by concubines. All these internal struggles lead to plotting against each other and several suicides. Chin Ko-ching hangs herself; Pao-yu's good friend Chin Chung dies young; the maid Chin-chuan drowns herself in a well; Second Sister Yu commits suicide by swallowing gold; Pao-yu's favorite maid, Chin-wen, dies soon after being dismissed because of Lady Wang's prejudice against her. Even Pao-yu himself comes under an evil influence and is the target of an assassination plot by Lady Chao and her son, Chin Huan.
Granny Liu's visits to the Chin family bear convincing witness to the hypocrisy of the landlord class and their extravagance. Her simple and poor lifestyle stands in sharp contrast to their luxurious way of life. The Chia family's arbitrariness towards ordinary people and servants leads to Ho San's collusion with brigands to rob Lady Dowager of her gold and silver so that the Chia family's decline is accelerated. Chia Sheh's treachery and Chia Chen's lechery result in the confiscation of the family property. Finally, however, the Emperor's general amnesty pardons Chia Sheh and Chia Chen, Chia Cheng is allowed to return to his original position, and the confiscated property is restored.