This neurologist and a novelist friend, Rutherford, are given dinner at Tempelhof, Berlin, by their old school-friend Wyland, a secretary at the British embassy.

A chance remark by a passing airman brings up the topic of Hugh Conway, a British consul in Afghanistan, who disappeared under odd circumstances.

Later in the evening, Rutherford reveals to the neurologist that, after the disappearance, he discovered Conway in a French mission hospital in Chung-Kiang (probably Chongqing), China, suffering from amnesia.

After a crash landing, the pilot dies, but not before telling the four (in Chinese, which only Conway speaks) to seek shelter at the nearby lamasery of Shangri-La.

The lamasery has modern conveniences, like central heating, bathtubs from Akron, Ohio, a large library, a grand piano, a harpsichord, and food from the fertile valley below.

The others eventually decide they are content to stay: Miss Brinklow because she wants to teach the people a sense of sin; Barnard because he is really Chalmers Bryant (wanted by the police for stock fraud) and because he is keen to develop the gold mines in the valley; and Conway because the contemplative scholarly life suits him.

He learns that the lamasery was constructed in its present form by a Catholic monk named Perrault from Luxembourg, in the early eighteenth century.

[1] By the 1960s, Pocket Books alone, over the course of more than 40 printings, had sold several million copies of Lost Horizon, helping to make it one of the most popular novels of the 20th Century.

[2] United States President Franklin D. Roosevelt named the Presidential hideaway in Maryland, now called Camp David, after Shangri-La.

[3] In 1942, to ensure the safety of returning U.S. forces, Roosevelt answered a reporter's question about the origin of the Doolittle Raid by saying it had been launched from "Shangri-La".