The story begins with Chang Er's husband, Hou Yi, an archer and architect of great renown. One day, ten suns appeared in the sky, and the emperor, afraid of the imbalance of yin and yang, ordered Hou Yi to shoot the other nine suns down. Hou Yi obeyed, and his skill was recognized by the Great Goddess. She ordered him to build her a palace out of jade. He did so, and she, greatly impressed and pleased, rewarded him with a pill of immortality. There was one condition upon which he could take this pill; he had to fast and pray for one year. Hou Yi, however, did not get to take the pill, for his curious wife found it hidden in their house, and swallowed it. The Goddess, angry at such foolishness, banned her to the moon forever. It is said that she turned into a three legged toad and lives on the moon with a rabbit that grinds the pill of immortality in a mortar for her.

The moon festival commemorates the legend by acknowledging the largest moon of the year and people celebrate by eating many specialties, including the mooncake, the symbol of the legend and the festival.