U Po Kyin, an extremely powerful magistrate in Kyauktada, Upper Burma, plots and schemes to take down Dr. Veraswami, an upstanding Burmese who affronts U Po Kyin through his rectitude and geniality.
Flory, a timber merchant, has been in Burma for several years now. He meets with the handful of other Europeans in the Club, where they complain about their roles as administrators and businessmen in the quickly fading Empire. Flory does not care much for the British Empire and befriends Dr. Veraswami, discoursing about the negative effects the English have on the Burmese. The doctor defends the English, though, and believes his own countrymen to be less civilized.
Flory is remarkably lonely, and loathes himself for his ugly birthmark on one cheek. He has a Burmese mistress, Ma Hla May, but he feels nothing for her. He also laments his lack of courage in terms of nominating Dr. Veraswami to the Club after it is ordered that it be opened to a native member. Another member, Ellis, viciously hates the natives, and the other men –Mr. Lackersteen, Maxwell, Mr. Macgregor, and Westfield –are mostly indifferent but not particularly disposed toward the natives.
Flory's life changes when Mr. and Mrs. Lackersteen's niece Elizabeth arrives in the colony. She has come to live with them after her mother dies. Elizabeth hates the natives and all things that indicate a highbrow or artistic disposition. She craves only a life of ease and wealth, and hopes to marry a European she meets in Burma.
Flory and Elizabeth initially hit it off, but she becomes annoyed by the way he defends the natives and tries to praise their culture and mores. When Flory acts in a more masculine and authoritative way, as when they go on a hunting trip, she finds him more desirable and thinks she could possibly marry him. Flory discards Ma Hla May and falls deeply in love with Elizabeth. He does not notice when she becomes irritated when he talks about the natives, and can think of nothing he desires more than to marry her.
Meanwhile, U Po Kyin has kept up his crusade of rumors about the doctor, and targets Flory because he is the doctor's friend. U Po Kyin sends Ma Hla May to Flory's house to embarrass him and shriek for more money because he ruined and abandoned her.
Flory plans to ask Elizabeth to marry him after the hunting trip, but an earthquake occurs and he thinks it would be better to wait a little bit while the shock and excitement wear off.
A young man named Verrall arrives to spend a month with the Military Police. Handsome, cold, and arrogant, Verrall is uninterested in the social life of Kyauktada and manages to offend the other Europeans with his sneering behavior. Flory feels inferior to him, especially when he falls off his horse trying to be equally dashing. Elizabeth sees him fall and is disgusted by his perceived ineptitude. She ignores Flory, throwing him into despair and causing him to depart for the timber farm.
While Flory is away Elizabeth successfully ensnares Verrall and the two begin a romance, although Verrall offers no promises for the future. When Flory returns he is startled at this new development and is filled with intense envy and depression.
U Po Kyin announces his ultimate goal to his wife and co-conspirators, which is to become the first native member of the European Club. He will attain this by secretly instigating a rebellion and then putting it down. He carries this off successfully and is seen as a hero. However, a real rebellion brews and eventually breaks out without him knowing in advance.
One evening two thousand angry Burmese surround the Club. They demand Ellis in particular for a cruel act he committed, but everyone is in danger. Flory devises an idea to save them, and executes it perfectly. The rebellion ends and Flory, aided by Dr. Veraswami, is a hero. U Po Kyin also tries to get credit but is largely ignored. He is irate and begins to devise a new plan to ruin Flory.
Verrall departs the colony without even a goodbye to Elizabeth, and she decides she should marry Flory. The Christians in the colony gather for church and Flory is blissfully happy as he thinks about his new life with Elizabeth. Suddenly there is a screaming, and Ma Hla May begins to savagely cry and scream about how Flory ruined her. Orchestrated by U Po Kyin of course, the scene is distasteful, and Elizabeth notices Flory's dark birthmark as he flushes with shame. She is utterly repulsed by it, and when Flory tries to apologize, Elizabeth will have none of it; she departs in a cold fury and Flory feels the weight of the crushing disappointment. He decides to kill himself because there is no way he can go back to his old life. He shoots himself and dies.
No one is too surprised about Flory. A funeral is held. Dr. Veraswami is no longer held in esteem, and is transferred to another hospital. U Po Kyin enters the Club as the first native member but dies before he can start to carry out good works; it is feared he will languish in hell or return to earth as a lesser creature due to his sins. Elizabeth ends up marrying Mr. Macgregor and becomes a perfect burra memsahib.