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Emil Sinclair, the narrator is ten years old. He lives in his home with his parents, sisters and maidservant. His home is full of happiness, peace and security. He considers this to be the realm of light. Outside his home, is the realm of crime, rumors, ghost stories, fear, tramps and policemen, men beating their wives and other undesirable aspects of society. He considers this realm to be the dark realm.
Sinclair meets a boy named Franz Kromer. To create a good impression on him and the other neighborhood boys, Sinclair makes up a tale of having stolen a sack full of apples. Kromer threatens to reveal the theft. He bullies and blackmails him and manages to extort a small amount of money.
A new boy named Max Demian joins school. He is kind to Sinclair and saves him from Kromer's torture. However Sinclair continues to be tortured by his own guilty conscience for having told lies and then sworn that it is the truth. Demian's views on religious stories are quite contrary to those of religious people. Sinclair is dejected by his irreligious views.
Later Sinclair is sent to a residential school. Here he takes to drinking and bad ways. He is very upset and suffers. He does not have any friends. One day he sees a beautiful girl in a park. He refers to her as Beatrice. He is influenced by her though he does not even talk to her. His relationship with her is like that of a devotee to a shrine. He feels very peaceful with this platonic relationship. He then becomes friendly to a boy named Knauer who considers purity, celibacy and self-control to be of prime importance.
On one occasion Sinclair receives a note on which God Abraxas is mentioned. Later the teacher too mentions Abraxas. Sinclair realizes that Abraxas is god as well as devil. He is reminded of Demian who had told him that it is improper to worship only the good and leave out the rest. By doing so our worship is incomplete because the other half which is also a reality is neglected.
Later, Sinclair meets Demian again. He also meets his mother Fran Eva. He is happy to be in their company and enjoys the affection of Fran Eva. Later he is passionately attracted to her.
Sinclair sees a sparrow-hawk flying into the clouds. According to Demian the bird has much significance. "It is a move on the part of destiny." Demian has a dream about villages and towns being burnt. His mother too has a presentiment that something evil is to happen. Sinclair and Demian are puzzled.
Soon war breaks out. Demian being a lieutenant is posted to the front. Later Sinclair too goes to war. He is injured. He is taken to a hall where he is made to lie down. He sees Demian beside him. Demian tells him that he has to go, and he will not come again to him physically. Whenever he (Sinclair) has a problem like Kromer, he must look within himself and he will notice him (Demian) there. Ever since then whenever Sinclair manages to look deep within the darkness of his mind, he finds his own image resembling Demian - his brother and master.