The story follows a sea captain, Amasa Delano, (the fictionalized version of a real-life adventurer by the same name) and his crew on the Bachelor's Delight as it is approached by another, rather battered-looking ship, the San Dominick. Upon boarding the San Dominick, Delano is immediately greeted by white sailors and black slaves begging for supplies. An inquisitive Delano ponders the mysterious social atmosphere aboard the badly bruised ship and notes the figurehead, which is mostly concealed by a tarpaulin revealing only the inscription: "Follow your leader." Delano soon encounters the ship's noticeably timid but polite Spanish captain, Don Benito Cereno. Cereno is constantly attended to by his personal slave, Babo, whom Cereno keeps in close company even when Delano suggests that Babo leave the two in private to discuss matters that are clearly being avoided. Delano, however, does not bother Cereno to ask questions about the odd superficiality of their conversation; he believes Cereno's assertion that he and his crew have recently gone through a debilitating series of troubles, having been at sea now for an unsettingly long time. Cereno tells of these tribulations, including horrendous weather patterns and the fate of the slaves' master, Alexandro Aranda, who Cereno claims took fever aboard the ship and died.
Gradually, however, Delano's suspicions increase, based on his noting Cereno's sudden waves of dizziness and anxiety, the crew's awkward movements and whisperings, and the unusual interaction of the ship's white and black residents. After his men finally drop off the supplies from the Bachelor's Delight which he promised to the San Dominick, Delano prepares to leave when suddenly Cereno jumps overboard, pursued by a dagger-wielding Babo. The canvas falls off the ship's figurehead, revealing the strung-up skeleton of Alexandro Aranda. Suddenly, a battle erupts, initiated by the ship's slaves upon Delano's crew. Delano's men stop Babo from killing Cereno and they eventually capture the San Dominick's black insurgents, suffering a few casualties on their own side.
Delano then recounts what happened aboard the San Dominick prior to the story thus far, according to what he later learns: that the black slaves overthrew the white crew and killed Aranda, keeping some sailors, including its captain, Cereno, alive. The slaves wanted Cereno to sail them back to Africa; however, the ship was hardly equipped for the transatlantic journey, so Cereno directed the ship toward the coast in the hopes of being rescued, though claiming to the slaves that he was merely seeking more supplies. When the Bachelor's Delight came into view, the slaves hid Aranda's body and told the white sailors to be quiet and acquiescent on threat of death. Cereno was presented as the captain in control, when in fact Babo secretly manipulated the entire situation.
Delano concludes his story with the trial and execution of Babo. He notes, interestingly, that Cereno seems devastated by Babo's death, falls into a deep depression, and dies himself a few months later. Delano ponders about how Cereno, in a role reversal as Babo's "slave" followed by the death of one and then the other, indeed seemed to abide by his ship's inscription: "Follow your leader."