So you level up on a rigid basis, determined by the XP table in the back of your rulebook, right? Perfectly reasonable, and definitely the standard for most RPGs. However, you might want to consider if this really suits your style of play. If you like going strictly by the rules, and having a well-defined point at which you level, you likely want to keep that method, or a similar one you may have developed.

However, in a narrative game, you may want to tie leveling to a specific plot point rather than XP. For instance, defeating the demon king triggers a level, as the party has made a significant plot accomplishment. From a narrative point of view, they’ve proven their strength and are now expected to reliably be able to handle this situation, and possibly handle harder situations. Gaining a level represents being able to fulfill these expectations.

You might even give them the level just before this battle for other narrative reasons. Perhaps the fighter learned a new battle technique that is intended to help him battle the demon king. Maybe the wizard has just developed a powerful binding spell for this purpose. Things like this happen all the time in stories, yet in rpgs they always seem to happen after the battle when the new techniques are no longer immediately needed. Of course, this needs to be done carefully, since you don’t want their new powers to completely overshadow your boss encounter either.

Perhaps they spend a year studying with appropriate high level masters of their particular art, be it martial or magical. After this time, it’s likely highly appropriate they gain a level or two. That study and dedication ought to be worth something. For it to matter, it also ought to be roleplayed through of course, unless the point is to give them levels to prepare them for a much higher power part of the story.

Another possibility is that their power is tied to an item, quest, or deity in some way. By retrieving the item, they assimilate its power into their being, as though it’s an extension of them. By taking on a quest and coming into alignment with a higher purpose, perhaps they draw power from that purpose or a god aligned with that purpose. Perhaps, if you can work out the bookkeeping ahead of time, you could even have them level up in the middle of a combat to deal with awakening powers or perfecting new techniques in stressful situations.

This is convenient for matching party power to plot pacing since you can do it without messing with the numbers to make it work. You just have to be sure the players buy into a heavy narrative game, but hopefully you can agree on a style with your players without worrying about how levels are doled out. The main point is to make leveling less about bookkeeping and instead have it serve the story you and your players want to tell.