It was originally published in 1902 in the Strand Magazine under the general title The Psammead, or the Gifts, with a segment appearing each month from April to December.

The five children (Cyril, Anthea, Robert, Jane, and their baby brother, Hilary, known as "the Lamb") are playing in a gravel pit when they uncover a rather grumpy, ugly, and occasionally malevolent Psammead, a sand-fairy with the ability to grant wishes.

They wish to be rich, then find themselves with a gravel-pit full of gold spade guineas that no shop will accept as they are no longer in circulation, so they cannot buy anything.

Robert is bullied by the baker's boy, then wishes that he was bigger — whereupon he becomes eleven feet tall, and the other children show him at a travelling fair for coins.

It seems that the gamekeeper, who is now their friend, will be blamed for the robbery, and the children must beg the Psammead for a complex series of wishes to set things right.

[3] The word "Psammead", pronounced "sammyadd" by the children in the story, appears to be a coinage by Nesbit from the Greek ψάμμος "sand" after the pattern of dryad, naiad and oread, implicitly signifying "sand-nymph".

However, its hideous appearance is unlike traditional Greek nymphs, who generally resemble beautiful maidens.

[6] One of the children has read the original book and wishes to meet Cyril, Anthea, Jane and Robert.

[7] A wizard named Psamathos Psamathide, described as a "Psamathist" (expert in sand) appears in J. R. R. Tolkien's Roverandom.