The book begins with Biblo Baggins enjoying a pipe after breakfast. This is one of his favorite pleasures and he feels quite content in doing so. He is middle-aged, and resides in a burrow in the ground.
One morning Gandalf, a wizard stops by to talk with Biblo. He tells Biblo that he is looking for someone to go on an adventure with him. Although Biblo is tempted he declines, but not before inviting Gandalf for tea the next morning. The next day Biblo hears his doorbell and he remembers inviting Gandalf for tea, but instead of the wizard at the door, there is a group of dwarves, thirteen in all.
Thorin son of the dwarf king starts to outline a plan on how to regain the treasure stolen by the dragon Smaug. Biblo is shocked to realize these plans involve him. He then realizes that Gandalf has tricked him by inscribing on his door that he was a burglar seeking a job with lots of excitement. With all this talk of quests and glory Biblo decides to join the party after all.
Gandalf reveals a key and a map of their journey, which ends at the Lonely Mountain. It is there that the treasure of Thorins’ ancestors is guarded by Smaug. The quest begins and the party meets at the Green Dragon Inn. From there they venture into the Lone-lands. As heavy rains begin to fall, Biblo notices that Gandalf is missing. When it starts to pour they stop to investigate a light.
Their Biblo finds three trolls grumbling about food. Biblo decides to live up to title of burglar and attempts to pick one of the trolls’ pockets. However they quickly capture him. The dwarfs see what's going on and try to save Biblo but all of them except Thorin are caught. Thorin formulates a plan to free them but fails. Gandalf returns and occupies the trolls till dawn, and then they turn into stone.
The group takes the two swords and a knife the trolls were carrying. The travelers come across the Secret Valley. There they stop at Elronds’ Last Homely House. Elrond tells them the only way to use the key that Thorin possesses is to wait where the thrush knocks and the setting sun will shine up on the keyhole. The next morning the group heads toward the Misty Mountains. A storm has caused them to seek shelter in a cave. The cave however turns out to be an entrance to the goblin kingdom.
Again the group is captured. Only Gandalf is free, and he slays the Goblin King, and once again frees the party from doom. During the escape Biblo is knocked unconscious and is left behind. He awakes to find a ring of power that belongs to Gollum, which makes its wearer invisible. Biblo slips the ring on his finger and disappears. He follows Gollum invisibly toward the entrance to the outside world.
He then jumps over Gollums' head to freedom. Outside he is finds his dwarf friends. Later they encounter Wargs, which are large savage wolves. The Wargs chase the party into the trees. High in the trees Gandalf uses a spell to start the pine cones on fire, in order to drive the wolves away. However the plan backfires and the very trees they took refuge in is now burning.
Luckily for them the king of the eagles spots them. He and his eagles drop out of the sky and saves the party. The eagles drop them off near Mirkwood Forest. This is where they come across Beorn; a bear like man who can change into a bear. He puts them up for the night and outfits them with supplies for their trip into Mirkwood. He also warns them not to stray from the path in the forest.
When they are ready to enter the forest, Gandalf announces he will not be accompanying them in this part of the journey. The group feels lost without him but they go on. They come across a black river.
It is here that Bombur, one of the Dwarves falls in and is forced into a sleep from which he cannot awake. Food is scarce now and the hungry travelers are lured off the path by visions of elves feasting in the forest. To their surprise every time they announce their presence to the elves…they elves.