Ayah

Word by Word
نَحۡنُ
We
نَقُصُّ
relate
عَلَيۡكَ
to you
أَحۡسَنَ
the best
ٱلۡقَصَصِ
of the narrations
بِمَآ
in what
أَوۡحَيۡنَآ
We have revealed
إِلَيۡكَ
to you
هَٰذَا
(of) this
ٱلۡقُرۡءَانَ
the Quran
وَإِن
although
كُنتَ
you were
مِن
before it
قَبۡلِهِۦ
before it
لَمِنَ
surely among
ٱلۡغَٰفِلِينَ
the unaware
نَحۡنُ
We
نَقُصُّ
relate
عَلَيۡكَ
to you
أَحۡسَنَ
the best
ٱلۡقَصَصِ
of the narrations
بِمَآ
in what
أَوۡحَيۡنَآ
We have revealed
إِلَيۡكَ
to you
هَٰذَا
(of) this
ٱلۡقُرۡءَانَ
the Quran
وَإِن
although
كُنتَ
you were
مِن
before it
قَبۡلِهِۦ
before it
لَمِنَ
surely among
ٱلۡغَٰفِلِينَ
the unaware
Translation

We do relate unto thee the most beautiful of stories, in that We reveal to thee this (portion of the) Qur'an: before this, thou too was among those who knew it not.
Tafsir

We will relate to you the best of narratives in what We have revealed, in Our revealing, to you this Qur'aan, though (wa-in: in is softened, in other words [understand it as] wa-innahu) prior to it you were of the heedless.
"Tafsir of Surah Yusuf
Qualities of the Qur'an
Allah says:
الر
Alif-Lam-Ra.
In the beginning of Surah Al-Baqarah we talked about the separate letters,
Allah said,
تِلۡكَ ايَاتُ الۡكِتَابِ
These are the verses of the Book.
in reference to the Clear Qur'an that is plain and apparent, and explains, clarifies and makes known the unclear matters.
الۡمُبِينِ
that is clear.
Allah said next,
إِنَّا أَنزَلۡنَاهُ قُرۡانًا عَرَبِيًّا لَّعَلَّكُمۡ تَعۡقِلُونَ
Verily, We have sent it down as an Arabic Qur'an in order that you may understand.
The Arabic language is the most eloquent, plain, deep and expressive of the meanings that might arise in one's mind. Therefore, the most honorable Book, was revealed in the most honorable language, to the most honorable Prophet and Messenger, delivered by the most honorable angel, in the most honorable land on earth, and its revelation started during the most honorable month of the year, Ramadan. Therefore, the Qur'an is perfect in every respect.
So Allah said,
نَحۡنُ نَقُصُّ عَلَيۡكَ أَحۡسَنَ الۡقَصَصِ بِمَا أَوۡحَيۡنَا إِلَيۡكَ هَـذَا الۡقُرۡانَ وَإِن كُنتَ مِن قَبۡلِهِ لَمِنَ الۡغَافِلِينَ
We relate unto you the best of stories through Our revelations unto you, of this Qur'an.And before this, you were among those who knew nothing about it.
Reason behind revealing Ayah
On the reason behind revealing Ayah (12:3), Ibn Jarir At-Tabari recorded that Abdullah bin Abbas said,
""They said, `O, Allah's Messenger! Why not narrate to us stories?'
Later on, this Ayah was revealed,
نَحۡنُ نَقُصُّ عَلَيۡكَ أَحۡسَنَ الۡقَصَصِ
(We relate unto you the best of stories...).""
There is a Hadith that is relevant upon mentioning this honorable Ayah, which praises the Qur'an and demonstrates that it is sufficient from needing all books besides it.
Imam Ahmad recorded a narration from Jabir bin Abdullah that;
Umar bin Al-Khattab came to the Prophet with a book that he took from some of the People of the Book. Umar began reading it to the Prophet who became angry. He said,
أَمُتَهَوِّكُونَ فِيهَا يَا ابۡنَ الۡخَطَّابِ
وَالَّذِي نَفۡسِي بِيَدِهِ لَقَدۡ جِيۡتُكُمۡ بِهَا بَيۡضَاءَ نَقِيَّةً لَاا تَسۡأَلُوهُمۡ عَنۡ شَيۡءٍ فَيُخۡبِرُوكُمۡ بِحَقَ فَتُكَذِّبُونَهُ أَوۡ بِبَاطِلٍ فَتُصَدِّقُونَهُ
وَالَّذِي نَفۡسِي بِيَدِهِ لَوۡ أَنَّ مُوسَى كَانَ حَيًّا مَا وَسِعَهُ إِلاَّ أَنۡ يَتَّبِعَنِي
Are you uncertain about it Ibn Al-Khattab?
By the One in Whose Hand is my soul! I have come to you with it white and pure. Do not ask them about anything, for they might tell you something true and you reject it, or they might tell you something false and you believe it.
By the One in Whose Hand is my soul! If Musa were living, he would have no choice but to follow me.
Imam Ahmad also recorded a narration from Abdullah bin Thabit who said,
""Umar came to Allah's Messenger and said; `O Messenger of Allah! I passed by a brother of mine from (the tribe of) Qurayzah, so he wrote some comprehensive statements from the Tawrah for me, should I read them to you?'
The face of Allah's Messenger changed (with anger). So I said to him, `Don't you see the face of Allah's Messenger?""
Umar said, `We are pleased with Allah as our Lord, Islam as our religion, and Muhammad as our Messenger.'
So the anger of the Prophet subsided, and he said,
وَالَّذِي نَفۡسُ مُحَمَّدٍ بِيَدِهِ لَوۡ أَصۡبَحَ فِيكُمۡ مُوسَى ثُمَّ اتَّبَعۡتُمُوهُ وَتَرَكۡتُمُونِي لَضَلَلۡتُمۡ إِنَّكُمۡ حَظِّي مِنَ الاۡاُمَمِ وَأَنَا حَظُّكُمۡ مِنَ النَّبِيِّين
By the One in Whose Hand is Muhammad's soul, if Musa appeared among you and you were to follow him, abandoning me, then you would have strayed. Indeed you are my share of the nations, and I am your share of the Prophets."
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