Caleb Williams, a poor, self-educated, orphaned young man, and the novel's first-person narrator, is recommended a job on the estate of the wealthy Ferdinando Falkland. Although Falkland is generally a reserved and quiet master, he also has sudden fits of rage. Concerned about his outbursts, Caleb asks Mr Collins, administrator of Falkland's estate, if he knows the cause of Falkland's odd temper.
Collins proceeds to tell of Falkland's past, citing Falkland's long history of stressing reason over bloodshed. Falkland's neighbour, Barnabas Tyrrel, was a tyrannical master who oppressed and manipulated his tenants. Tyrrel became the enemy and competitor of Falkland, who was loved for his brave and generous demeanor. Falkland continually righted the many wrongs Tyrrel caused members of his household and his neighbours, which only elevated the community's respect and esteem for Falkland. The conflict between the two men came to a head when, at the funeral services for Emily Melvile—Tyrrel's niece whom he had unfairly arrested out of his jealousy of her admiration for Falkland—Tyrrel physically attacked Falkland. Tyrrel himself was found murdered shortly afterward. Although immediately considered a suspect for Tyrrel's murder, Falkland defended himself on the basis of his stainless reputation. Instead, two tenants of Tyrrel were found with incriminating evidence, convicted of the murder, and both hanged. Falkland's emotional state, Mr Collins explains, has been wavering ever since.
The account of Falkland's early life intrigues Caleb, though he still finds the aristocrat's strange behaviours suspicious. Caleb obsessively researches aspects of the Tyrrel murder case for some time and his doubts gradually increase. He convinces himself that Falkland is secretly guilty of the murder.
When Caleb's distrust is exposed, Falkland finally admits that he is the murderer of Tyrrel, but forces Caleb to be silent about the issue under penalty of death. Caleb, however, flees the estate, but is later convinced to return to defend himself with the promise that, if he can do so effectively in court, he will be freed. Falkland's brother-in-law oversees a fraudulent trial of the two and, eventually, sides with Falkland, having Caleb arrested. The anguish of a life in prison is documented through Caleb and other wretched inmates. Eventually, a servant of Falkland supplies Caleb with tools he can use to escape, which he successfully does, venturing out into the wild.
Caleb must now live a life evading Falkland's attempts to recapture and silence him. In the wilderness, Caleb is robbed by a band of criminals, physically attacked by one in particular, and then rescued by a different man who takes him to the headquarters of this same group of thieves. Caleb's saviour turns out to be the Captain of these thieves. The Captain accepts Caleb and promptly banishes Caleb's attacker, a man called Jones (or Gines in some editions), from the group. Caleb and the Captain later debate the morality of being a thief and living outside the oppressive restrictions of the law. Shortly afterward, a sympathiser of Jones tries to kill Caleb and then compromises his whereabouts to the authorities, forcing Caleb to flee once more.
As he is boarding a ship to Ireland, Caleb is confused for another criminal and again arrested. He bribes his freedom from his captors, before they discover that he is in fact wanted after all. While Caleb makes a living by publishing stories about notorious criminals, the vengeful Jones subsequently puts out a reward for Caleb's capture and keeps Caleb's movements under careful surveillance.
Ultimately betrayed by a neighbour, Caleb is taken to court; however, Caleb's accusers do not show up and he is abruptly released only to be immediately ensnared by Jones and sent to confront Falkland, face to face. Falkland, now aged, gaunt, and frail, claims that he deliberately did not show up in court, so that he could persuade Caleb to put in writing that his accusations are unfounded. However, Caleb refuses to lie for Falkland, and Falkland threatens him, but lets him go. Falkland later sends the impoverished Caleb money to try to bribe him. Next, Caleb attempts to make a living in Wales, but must move around frequently as Jones continues to track him. When Caleb finally decides to travel to the Netherlands, Jones confronts him and reveals to him the true scope of Falkland's tyrannical power, warning Caleb that he will be either murdered or caught and executed if he attempts to leave the country. At last, Caleb convinces a magistrate to summon Falkland to court so that he can make his accusations public and reveal Falkland's guilt once and for all.
Before an emotional court, Caleb vindicates himself and makes his accusations of Falkland; however, he reveals his sadness at having become part of the same vicious mindset as Falkland that forces people into groups competing for power. Ultimately, Caleb finds a universality among all humans, whether the oppressor or the oppressed, finding humanity even in Falkland. He even voices his admiration and respect for many of Falkland's positive qualities, including his ideals. The two forgive each other and it is noted that Falkland soon dies thereafter. Despite his noble pursuit of justice, though, Caleb is not contented, but rather, feels his success is hollow and himself responsible for Falkland's death. Caleb concludes with an explanation that the point of the book is merely to straighten out the details of Falkland's turbulent history, rather than to condemn the man.
Original manuscript ending
The original and more controversial manuscript ending was not officially published, though is often included as an alternate ending in many current editions of the novel. In this version, Falkland argues in court that Caleb's agenda is merely revenge. Caleb responds, claiming himself to be a voice of justice and offering to gather witnesses against Falkland, but the magistrate suddenly silences him and denies his offer, calling Caleb insolent and his accusations ludicrous. With some pages missing, the story jumps to the final scene of Caleb imprisoned some time later, with none other than Jones as his warden. Caleb's narration now seems erratic and disorganised, implying that he has gone mad. Caleb has been told that Falkland has died recently, but he does not seem to remember who Falkland is. In his delirium, Caleb concludes that true happiness lies in being like a gravestone that reads, “Here lies what was once a man.”