With the exception of the long Confession of Nature in the Roman de la Rose, half a dozen passages of which Chaucer adapts at various points in the Squire's Tale, no close literary source of the poem has come to light, and the fragmentary nature of the narrative, as well as the strong likelihood of Chaucer's dependence on oral reports and reminiscences of travelers and merchants, renders the possibility of finding a written source for the story unlikely indeed. Nonetheless, the miscellaneous quality of the tale and its wide range of allusion and reference to particular personages, topics and motifs suggest both the broadly intellectual and specifically literary traditions to which Chaucer was indebted, and which here are illustrated largely through analogues, rather than sources.

Thomas Percy and Richard Hole early noted general similarities of the Squire's Tale to the “Tale of the Enchanted Horse” in the Thousand and One Nights, and although this vast collection of stories as we know it today was unavailable to Chaucer, some form of this story – one of the oldest in the anthology – doubtless circulated in western Europe in the late thirteenth century, as is made clear by independent redactions of it in two Old French romances, the Cleomadés of Adenet le Rois and the Meliacin of Girart d'Amiens. The oriental tale itself is known today in three versions that represent medieval forms of the story: the two similar versions designated, respectively, Boulaq (B) and Habicht (H), and a somewhat more independent one, communicated to the orientalist Galland (G) early in the eighteenth century, which likewise appears to preserve much earlier materials. With individual variations, the story can be summarized as follows: