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The Magic Horse is the story of two brothers, one highly skilled in the practical arts, and the other, Prince Tambal, considered by most people to be only a dreamer. Their father, the King, announces a competition to produce "interesting and useful devices" - the entry produced by a woodcarver appears to be only a simple wooden horse, nothing more than a toy, apparently of little value. But, when Prince Tambal examines the horse more closely, he discovers that the horse is able to magically transport its rider to whatever place is in the rider's mind. In this way, Prince Tambal comes to learn a great many things, and eventually, to know "his heart's desire".

This book is one of a series of illustrated Teaching-Stories by Idries Shah, stories which have captivated hearts and minds for more than a thousand years. The stories are designed to help children learn to examine their assumptions and to think for themselves.

In the Sufi tradition there is a continuum between the children's story, the entertainment or folklore story, and the instructional or instrumental story. A story can help children deal with difficult situations and give them something to hold on to, while the same story can stimulate a deeper understanding in adults.