A folktale about two sisters who make a wager on the color of a white horse has been told in India for at least three thousand years; it is recorded in the oldest Vedic texts, and it is still sung today in a Tamil oral tradition. A survey of this historical depth shows that the major variants of the tale reflect developments in Hindu religious thought. But more interesting is the relation between the embedded folktale and its frame text in classical mythology. In each case, the tale echoes the themes of the frame text but reorients them, bringing the cosmic concerns of gods and demons within the compass of human kinship, within the home, even the bedroom. These observations lead to a discussion of general relations between folklore and classical traditions in India.