The Alchemist follows the journey of an Andalusian (southern Spanish) shepherd boy named Santiago. Believing a recurring dream to be prophetic, Santiago decides to travel to a Romani fortune-teller in a nearby town to discover its meaning. The gypsy woman interprets the dream as a prophecy telling the boy that there is a treasure in the pyramids in Egypt.
Early into his journey, he meets an old king, whose name was Melchizedek, who tells him to sell his sheep to travel to Egypt and introduces the idea of a Personal Legend (which is always capitalized in the book). Your Personal Legend "is what you have always wanted to accomplish. Everyone, when they are young, knows what their Personal Legend is." He adds that "when you want something, all the universe conspires in helping you to achieve it." This is the core theme of the book.

Along the way, Santiago meets an Englishman who has come in search of an Alchemist and continues his travels with him. They travel through the Sahara desert and during his journey, Santiago meets and falls in love with a beautiful Arabian woman named Fatima, who resides with her clan near around the desert Oasis. He asks Fatima to marry him, but she says she will only marry him after he completes his journey and finds his treasures. He is perplexed by this, but later learns that true love will not stop nor plead to sacrifice one's Personal Legend, and if it does, it is not true love.

Santiago then encounters a lone alchemist who also teaches him about Personal Legends. He says that people want to find only the treasure of their Personal Legends but not the Personal Legend itself. Santiago feels unsure about himself as he listens to the alchemist's teachings. The alchemist states, "Those who don't understand their Personal Legends will fail to comprehend their teachings." It is also stated that treasure is more worthy than gold. The main theme of the story is defined by this quote, which recurs all through the novel, "When a person really desires something, all the universe conspires to help that person to realize his dream." It denotes the power of desires and passion and its ability to manifest it in real life.

The book's main theme is about finding one's destiny. According to The New York Times, The Alchemist is "more self-help than literature." An old king tells Santiago, "when you really want something to happen, the whole universe will conspire so that your wish comes true." This is the core of the novel's philosophy and a motif that plays all throughout Coelho's writing in The Alchemist.

The Alchemist was first released by an obscure Brazilian publishing house. Albeit having sold "well", the publisher of the book told Coelho that it was never going to sell, and that "he could make more money in the stock exchange."

The Alchemist has been translated into 80 languages, according to The New York Times, as of 2015. This gave Coelho the position as the world's most translated living author, according to the 2009 Guinness World Records.