The story takes place once upon a time, where there lived a very powerful ruler who cared more about his clothes than anything else in the world. One day, two bandits came to see the Emperor. Pretending to be tailors, they offered to make for him the most beautiful suit in the whole world. The bandits explained that the suit would be made from a special cloth that would be invisible to anyone that was unfit for the Emperor's position. The Emperor immediately agreed, and ordered them to begin working on his new clothes right away.
A few days later, the bandits returned with the Emperor's new clothes. The Emperor was shocked to discover that he could not see the special cloth—to him, it looked like the swindlers had made absolutely nothing. But the Emperor was too embarrassed to admit this, and instead he decided to wear his new suit in the royal procession, where he would test the true powers of the magic cloth.
As the Emperor paraded through the kingdom, the townspeople praised his new suit, even though it appeared that he was wearing nothing but his underwear. Finally, a child from within the crowd called out: "But the Emperor has nothing on!" The crowd fell silent, anxiously awaiting the Emperor's response. Instead of getting angry, however, the Emperor realized that the little boy was the only person with enough courage to be honest about what he saw. Although he was embarrassed, the Emperor finished the parade with his head held high.