The first modern Chinese study of the history of premodern Chinese fiction is Lu Xun’s 魯迅 (1881-1936) A Brief History of Chinese Fiction 中國小說史略 (A Brief History hereafter), a work of fundamental importance in Western and Chinese academia. Lu’s influence on the study of premodern Chinese fiction is three-fold: 1) confounding the concept of fiction with xiaoshuo 小說; 2) establishing a Social Darwinist, evolution-centered approach as a major way of studying premodern Chinese fiction; and 3) setting an arbitrary scope for what can be considered fictional in Chinese literary history based on the desire to transform xiaoshuo into the modern Western notion of fiction. In this dissertation, I examine how Lu’s problematic discourse has shaped modern studies of premodern Chinese literature. I address the three facets of his influence by contextualizing his Social Darwinist and teleological views in the formative period of Sino-Japanese modernity, providing an alternative theoretical framework to conceptualize the development of fiction based on current narrative theories, and clarifying the historical relationship between fiction and xiaoshuo with the aid of digital tools. I argue that the equivalence between xiaoshuo and fiction drawn by Lu Xun and modern scholars and the current understanding of what constitutes fiction in premodern China are largely based on a teleological and Social Darwinist theoretical framework; this framework is characterized by searching for qualities that define the modern Western novel in premodern Chinese literature, which is an intellectual legacy of late nineteenth century Japan and early twentieth century China—the formative period of a modern East Asian discourse on fiction.