The Palace of Dreams considering its anti-totalitarian meaning is a miracle of its own because it was published under the communist system of the time by virtue of the novel’s text’s coding in the best possible way. This feature, made the novel important, interesting and challenging to the scholars because it constitutes a literary model that can be studied from different points of view and still provides more new ones. The aim of this paper is to examine the role of the character/s in decoding the hidden meaning layers of the novel by generally applying a formalist approach with a main focus on the structuralist method. These roles will be distinguished by performing a theoretical analysis regarding the involved components in their concretization, by carrying out stylistic analyses to decipher the figurative language and by utilizing these results through interpretive analyses thereby introducing yet another new way of studying the novel’s coded contexts: the first one related to the exposure of the totalitarian dictatorships, the second one related to ethnic identity and the role in terms of the position of Albanians in the socio-political life of the empire and additionally covering an unexplored area in the existing literature. Mark-Alem is delegated multi-functional roles: he becomes a figure, a theme, an idea and a link that holds up the narrative discourse itself. He is the tool that makes the difference between the readers’ understanding of the “historical” events dealt with in this book and the coded contexts that lay under the storyline.