The story itself begins when an evacuation of Westerners is ordered in the midst of revolution in Baksul, India. A plane containing four passengers is hi-jacked and flown far away into the Keun-Lun Mountains of Tibet. The plane crashes and the passengers are welcomed to the valley of the Blue Moon, and the lamasery of Shangri-la. Here they see an isolated monastery shrouded in mystery, which combines Christianity and Buddhism with a focus on the progression of knowledge.
The four passengers who land in Shangri-la are Barnard, a boisterous American, Miss Brinklow, a Christian missionary, Mallinson, a headstrong and passionate English youth, and Conway, the main character and WWI veteran who is unattached and somewhat passionless. All of the characters except Mallinson enjoy life in Shangri-la. Conway especially finds himself at home there and eventually the High Lama of the lamasery unveils all its mysteries of to him. Conway learns that the inhabitants, thanks to the climate and a special drug, live to an extreme old age. They devote the length of their lives to the pursuits of knowledge and do everything in moderation. They believe that their hidden society will escape the destruction toward which the outside world is heading. He also learns that the lamas of Shangri-la intend to keep him and his companions there forever.
Almost immediately Conway feels he is ideally suited to their way of life. He meets other lamas who have been at Shangri-la for a long time, including Lo-Tsen, with whom he quietly falls in love with. All the newcomers desire to stay, except for Mallinson. He and Lo-Tsen fall in love with one another and makes plans to