Shane is set in Wyoming Territory in the summer of 1889. As the story begins, eleven-year-old Bob Starrett, the son of Joe and Marian Starrett, watches as a stranger rides into the valley. The stranger rides all the way up to the Starrett farm. The Starretts are one of a number of homesteaders in the valley. The stranger is impressive in his appearance, conveying a sense of power, even though he is only of medium height with a slim build.
The stranger asks Joe Starrett if he may have some water for himself and his horse. Starrett tells him to have all he wants. The horse drinks from the trough and the stranger washes his hands and arms. He thanks Joe and is about to leave when Joe offers him food and accommodation for the night. The man accepts, and reveals that his name is Shane. Shane says a kind word to young Bob, which thrills him.
Marian cooks a fine meal and the two men talk around the table. Shane is courteous but gives no detailed information about himself, even though Joe tries to find out who he is and what his story is. On the porch after dinner, Joe tells Shane about the situation in the valley. Large-scale cattle ranching on an open range is on its way out. The big cattle ranchers are being squeezed by homesteaders who fence in their land and farm. He talks about Luke Fletcher, a big cattle rancher in the area, who has a lot of land. But Fletcher is losing his rights to land as more homesteaders move in. Joe knows Fletcher is worried about this.
After Shane goes to bed down in a bunk in the barn, Marian remarks to her husband about how odd it was that Shane would not talk about himself. She likes him, though. They agree that Shane is mysterious and also dangerous, although not to them. Joe trusts him.
Schaefer is known for the terseness and economy of his writing, and in this short opening chapter the basic elements of the story are laid out. Shane is a man of mystery. He does not speak of his past or where he comes from. He conveys a sense of quiet confidence and power held in check. The first words he speaks directly to young Bob, “A man who watches what is going on around him will make his mark” (p. 6) is the seed of the relationship between boy and man that will grow as the novel progresses. Shane will act as something of a mentor to Bob. The sense of mystery about Shane is enhanced when Bob is helping him with his horse, hanging up the saddle and doing other tasks. When he reaches for the saddle-roll, Shane takes it from him and makes it clear he is not to touch it. This is a clue for the reader, a moment of foreshadowing: why is Shane so careful not to let the boy touch his saddle-roll?
This chapter also explains the basic conflict of the novel, between the homesteaders and Luke Fletcher, the cattle rancher. Homesteaders at that time were people who took advantage of the Homesteading Act of 1862. This act provided land grants of 160 acres to any citizen who paid a registration fee and agreed to live on the land for five years continuously. The homesteaders in this Wyoming valley represent an advance in civilization from the cattle ranchers on the open range. This is why Fletcher is worried about the situation. He fears it may threaten his livelihood. Joe knows that his way of homesteading and farming is the way of the future, and Fletcher essentially belongs to the past.