It is Christmas Eve, and several London residents are spending the holiday in a country house together. They tell each other tales, which is common on Christmas Eve. After a particularly harrowing ghost story, a man named Douglas indicates that he has an even more terrifying tale to tell about two children who saw a ghost.
The other people beg him to tell the story, but he says he must send for the written document from London. The tale was told to him by his sister's governess many years ago, and she gave him a copy in writing before she died. She never told the story to anyone else, and this is his first time telling it.
While they wait for the manuscript, Douglas tells the assembled people that the governess got her first job taking care of two children at a remote country home called Bly. Their uncle was their guardian, since his brother died in the service and his parents then died, as well. The former governess took care of both the boy and the girl, but after she died Miles was sent to school. This new governess had to take care of Flora and watch after Miles on school breaks. Mrs. Grose was the housekeeper at Bly, and the governess was to have her help on household matters.
The governess was a little upset by the uncle's one condition. She was to handle all matters herself and never contact him. However, the pay was excellent and she was charmed by the uncle. In fact, she took the job just to please him.
This prologue sets up a story within a story. The rest of the book is the governess's manuscript. Why does James feel the need to have a narrator telling the story of Douglas telling a story that he reads from the governess's story? This serves to make the story sound more authentic: we can trust the narrator who can trust Douglas who can trust the governess. However, it also makes the story harder to believe, as readers will be familiar with the fact that stories tend to get garbled when retold. Hence, James has adroitly created doubt about the trustworthiness of the story at the same time that he seems to be claiming it is a true story.
It is unclear exactly how much the uncle charmed the governess. The narrator of the prologue, who is not to be confused with the narrator of the rest of the story (the governess) assumes that the governess took the job because of "the seduction exercised by the splendid young man. She succumbed to it" (9). Douglas does not confirm or deny this analysis, nor is the word "seduction" ever defined. As with the rest of this text, there is an undercurrent of sexuality that is never stated overtly.