The novel is divided into three parts, following a third-person omniscient narrative with no main character.
Earth and the Overlords
In the late 20th century, the United States and the Soviet Union are competing to launch the first spaceship into orbit, for military purposes. When vast alien spaceships suddenly position themselves above Earth's principal cities, the space race ceases. After one week, the aliens announce they are assuming supervision of international affairs, to prevent humanity's extinction, under the name of Overlords. In general, they let humans go on conducting their affairs in their own way. They overtly interfere only twice: in South Africa, where sometime before their arrival Apartheid had collapsed and was replaced with savage persecution of the white minority; and in Spain, where they put an end to bull fighting. Some humans are suspicious of the Overlords' benign intent, as they never visibly appear. Overlord Karellen, the "Supervisor for Earth," who speaks directly only to Rikki Stormgren, the UN Secretary-General, tells Stormgren that the Overlords will reveal themselves in 50 years, when humanity will have become used to their presence. Stormgren smuggles a device onto Karellen's ship in an attempt to see Karellen's true form. He succeeds, is shocked, and chooses to keep silent.
The Golden Age
Men called them Overlords They had come from outer space— they had brought peace and prosperity to Earth But then the change began. It appeared first in the children —frightening, incomprehensible. Now the Overlords made their announcement: This was to be the first step in the elimination of the human race and the beginning of—What?
—Original back cover quote, paperback edition
Humankind enters a golden age of prosperity at the expense of creativity. Five decades after their arrival, the Overlords reveal their appearance, resembling the traditional Christian folk images of demons: large bipeds with cloven hooves, leathery wings, horns, and tails. The Overlords are interested in psychic research, which humans suppose is part of their anthropological study. Rupert Boyce, a prolific book collector on the subject, allows one Overlord, Rashaverak, to study these books at his home. To impress his friends with Rashaverak's presence, Boyce holds a party, during which he makes use of a Ouija board. An astrophysicist and Rupert's brother-in-law, Jan Rodricks, asks the identity of the Overlords' home star. George Greggson's future wife Jean faints as the Ouija board reveals a star-catalog number consistent with the direction in which Overlord supply ships appear and disappear. With the help of an oceanographer friend Jan Rodricks stows away on an Overlord supply ship and travels 40 light-years to their home planet. Due to the time dilation of special relativity at near-light speeds, the elapsed time on the ship is only a few weeks, and he arranges to endure it in drug-induced hibernation.
The Last Generation
Although humanity and the Overlords have peaceful relations, some believe human innovation is being suppressed and that culture is becoming stagnant. One of these groups establishes New Athens, an island colony in the middle of the Pacific Ocean devoted to the creative arts, which George and Jean Greggson join. The Overlords conceal a special interest in the Greggsons' children, Jeffrey and Jennifer Anne, and intervene to save Jeffrey's life when a tsunami strikes the island. The Overlords have been watching them since the incident with the Ouija board, which revealed the seed of the coming transformation hidden within Jean.
Sixty years after the Overlords' arrival, human children, beginning with the Greggsons', begin to display clairvoyance and telekinetic powers. Karellen reveals the Overlords' purpose; they serve the Overmind, a vast cosmic intelligence, born of amalgamated ancient civilizations, and freed from the limitations of material existence. The Overlords themselves are unable to join the Overmind, but serve it as a bridge species, fostering other races' eventual union with it.
As Karellen explains, the time of humanity as a race composed of single individuals with a concrete identity is coming to an end. The children's minds reach into each other and merge into a single vast group consciousness. If the Pacific were to be dried up, the islands dotting it would lose their identity as islands and become part of a new continent; in the same way, the children cease to be the individuals which their parents knew and become something else, completely alien to the "old type of human".
For the transformed children's safety - and also because it is painful for their parents to see what they had become - they are segregated on a continent of their own. No more human children are born, and many parents die or commit suicide. The members of New Athens destroy themselves with a nuclear bomb.
Jan Rodricks emerges from hibernation on the Overlord supply ship and arrives on their planet. The Overlords permit him a glimpse of how the Overmind communicates with them. When Jan returns to Earth (approximately 80 years after his departure by Earth time) he finds an unexpectedly altered planet. Humanity has effectively become extinct, and he is now the last man alive. Hundreds of millions of children – no longer fitting what Rodricks defines as "human" – remain on the quarantined continent, having become a single intelligence readying themselves to join the Overmind.
Some Overlords remain on Earth to study the children from a safe distance. When the evolved children mentally alter the Moon's rotation and make other planetary manipulations, it becomes too dangerous to remain. The departing Overlords offer to take Rodricks with them, but he chooses to stay to witness Earth's end, and transmit a report of what he sees.
Before they depart, Rodricks asks Rashaverak what encounter the Overlords had with humanity in the past, according to an assumption that the fear that humans had of their "demonic" form was due to a traumatic encounter with them in the distant past; but Rashaverak explains that the primal fear experienced by humans was not due to a racial memory, but a racial premonition of the Overlords' role in their metamorphosis.
The Overlords are eager to escape from their own evolutionary dead end by studying the Overmind, so Rodricks's information is potentially of great value to them. By radio, Rodricks describes a vast burning column ascending from the planet. As the column disappears, Rodricks experiences a profound sense of emptiness when the Overlords have gone. Then material objects and the Earth itself begin to dissolve into transparency. Jan reports no fear, but a powerful sense of fulfillment. The Earth evaporates in a flash of light. Karellen looks back at the receding Solar System and gives a final salute to the human species.