In the midst of a beautiful, luxurious painter's studio, we meet Lord Henry Wotton and his friend, artist Basil Hallward. The studio is Basil's, and, as they chat, he critically regards his current masterpiece, a portrait of a gorgeous young man.
Lord Henry tells Basil that the painting is his best work ever and suggests where he should exhibit it – but Basil says he doesn't want to do that.
Lord Henry is appalled, but Basil holds out, claiming that he's put too much of himself into this painting. Henry protests that there's absolutely no resemblance between Basil and the man in the picture; while the subject of the painting is totally hot, intellectuals like Basil, he half-jokingly says, are generally pretty ugly.
Basil tells Henry that he's wrong – looks aside, anyone who's different in any way is marked by fate. He predicts that his art, Lord Henry's wealth, and Dorian Gray's beauty will make them all suffer for their distinction.
Lord Henry ignores Basil's dire prophecy, and focuses on the name – Dorian Gray, the beautiful boy in the portrait. Basil, it turns out, hadn't wanted to tell Henry Dorian's name, and Lord Henry asks why.
Basil replies that some names are special to him; whenever he likes someone, he always conceals their names from friends, because it makes them seem more mysterious. In general, mysteries are more appealing.
This is something Lord Henry completely understands. In his marriage for example, he and his wife have nothing but secrets, and they both like it that way.
Basil laughs off Lord Henry's cynical attitude, and claims that his friend isn't really a cynic on the inside. Lord Henry responds that everyone's a poseur of one kind or another, and that cynicism is entertaining, in the least.
The friends go out into the garden, and Henry announces that he has to leave. Before he goes, though, he asks one more question: why won't he exhibit Dorian's portrait?
Basil protests that he already told Lord Henry the real reason. Under pressure, he explains further, that it's not the sitter that the portrait reveals, but the artist himself. Basil is afraid that showing the picture would reveal the secret of his very soul.
Lord Henry laughs and asks what this secret is; Basil says he will tell it, though he warns that Lord Henry will hardly believe it, much less understand.
Basil then relates how he met Dorian at a party at Lady Brandon's. As he chatted with various boring nobles, he realized someone was looking at him – someone so utterly fascinating that it terrified him.
He tried to leave, but Lady Brandon grabbed him. He suddenly found himself face to face with the handsome young man who scared him: it's Dorian Gray.
Basil and Dorian start their friendship by laughing together at Lady Brandon; Lord Henry says lightly that laughter is a good way to begin a friendship, but the best way to end one, to which Basil replies that Henry does not understand what friendship or enmity is.
Lord Henry, who apparently is never serious, protests that he does indeed distinguish between his friends and enemies. He chooses his friends for their looks and his enemies for their brains.
Basil and Henry kid around a bit, and Basil claims again that his friend really is a decent man, inside his flippant façade.
Henry returns to the subject at hand – Dorian Gray. We learn that Basil sees Dorian every day.
Lord Henry remarks that it's amazing that Basil now cares for something more than his art, but Basil insists that Dorian is his art now; apparently, meeting Dorian has changed the whole way he sees the world.
Lord Henry starts hassling Basil about meeting Dorian. Basil finally admits that he doesn't want to exhibit the picture because the world will find out about his adoration for Dorian, something he hasn't even told Dorian about.
Lord Henry asks if Dorian feels the same way about Basil; Basil thinks Dorian likes him, but isn't sure. Lord Henry suggests that Basil might get sick of Dorian – after all, he reasons, genius lasts longer than mere physical beauty.
Basil thinks not. He argues that Lord Henry couldn't possibly understand, since he's so faithless in his loves. Ooh, ouch.
Lord Henry remembers that he's heard the name Dorian Gray before, from his Aunt Agatha; he hadn't paid attention when she mentioned him, but now wishes he had.
Basil replies that he's glad he didn't because he still doesn't want Henry to meet Dorian – and right on cue, Basil's butler announces that Mr. Dorian Gray has arrived. Score one for Lord Henry.
Basil orders the butler to tell Dorian to wait a few moments. Then he turns to Lord Henry authoritatively, and tries to impart once more how much Dorian means to him. Basil tells Lord Henry that Dorian is his best friend and warns him not to "influence" him.
Lord Henry just laughs him off, and we have to wonder what his plans are…