Protagonist Wilfred of Ivanhoe is disinherited by his father Cedric of Rotherwood for supporting the Norman King Richard and for falling in love with the Lady Rowena, Cedric's ward and a descendant of the Saxon Kings of England, after Cedric planned to marry her to the powerful Lord Aethelstane, a pretender to the Crown of England through his descent from the last Saxon King, Harold Godwinson. Ivanhoe accompanies King Richard on the Crusades, where he is said to have played a notable role in the Siege of Acre; and tends to Louis of Thuringia, who suffers from malaria.
The book opens with a scene of Norman knights and prelates seeking the hospitality of Cedric. They are guided there by a palmer, who has recently returned from the Holy Land. The same night, Isaac of York, a Jewish moneylender, seeks refuge at Rotherwood. Following the night's meal, the palmer observes one of the Normans, the Templar Brian de Bois-Guilbert, issue orders to his Saracen soldiers to capture Isaac.
The palmer then assists in Isaac's escape from Rotherwood, with the additional aid of the swineherd Gurth.
Isaac of York offers to repay his debt to the palmer with a suit of armour and a war horse to participate in the tournament at Ashby-de-la-Zouch, on his inference that the palmer was secretly a knight. The palmer is taken by surprise; but accepts the offer.
The story then moves to the scene of the tournament, presided over by Prince John. Other characters in attendance are Cedric, Aethelstane, Lady Rowena, Isaac of York, his daughter Rebecca, Robin of Locksley and his men, Prince John's advisor Waldemar Fitzurse, and numerous Norman knights.
On the first day of the tournament, a bout of individual jousting, a mysterious knight, identifying himself only as "Desdichado" (described in the book as Spanish for the "Disinherited", though actually meaning "Unfortunate"), defeats some of the best Norman competitors, including Bois-Guilbert, Maurice de Bracy (a leader of a group of "Free Companions"), and the baron Reginald Front-de-Boeuf. The masked knight declines to reveal himself despite Prince John's request, but is nevertheless declared the champion of the day and is permitted to choose the Queen of the Tournament. He bestows this honour upon the Lady Rowena.
On the second day, at a melee, Desdichado is the leader of one party, opposed by his former adversaries. Desdichado's side is soon hard pressed and he himself beset by multiple foes, until rescued by a knight nicknamed 'Le Noir Faineant' ("the Black Sluggard"), who thereafter departs in secret. When forced to unmask himself to receive his coronet (the sign of championship), Desdichado is identified as Wilfred of Ivanhoe, returned from the Crusades. This causes much consternation to Prince John and his court who now fear the imminent return of King Richard.
Because he is severely wounded in the competition, Ivanhoe is taken into the care of Rebecca, the daughter of Isaac, who is a skilled healer. She convinces her father to take him with them to York, where he can be best treated. The story then glosses the conclusion of the tournament including feats of archery by Locksley.
Capture and rescue
In the forests between Ashby and York, the Lady Rowena, Cedric and Aethelstane acquire Isaac, Rebecca and the wounded Ivanhoe, who have been abandoned by their servants for fear of bandits. En route, the party is captured by de Bracy and his companions and taken to Torquilstone, the castle of Front-de-Boeuf. The swineherd Gurth, who had served Ivanhoe as squire at the tournament and who was recaptured by Cedric when Ivanhoe was identified, manages to escape.
The Black Knight, having taken refuge for the night in the hut of a local friar, the Holy Clerk of Copmanhurst, volunteers his assistance on learning about the captives from Robin of Locksley. They then besiege the Castle of Torquilstone with Robin's own men, including the friar and assorted Saxon yeomen. At Torquilstone, de Bracy expresses his love for the Lady Rowena, but is refused. Brian de Bois-Guilbert tries to seduce Rebecca, and is rebuffed. Front-de-Boeuf tries to wring a hefty ransom from Isaac of York; but Isaac refuses to pay unless his daughter is freed.
When the besiegers deliver a note to yield up the captives, their Norman captors demand a priest to administer the Final Sacrament to Cedric; whereupon Cedric's jester Wamba slips in disguised as a priest, and takes the place of Cedric, who then escapes and brings important information to the besiegers on the strength of the garrison and its layout. Then follows an account of the storming of the castle. Front-de-Boeuf is killed while de Bracy surrenders to the Black Knight, who identifies himself as King Richard and releases de Bracy. Bois-Guilbert escapes with Rebecca while Isaac is rescued by the Clerk of Copmanhurst. The Lady Rowena is saved by Cedric, while the still-wounded Ivanhoe is rescued from the burning castle by King Richard. In the fighting, Aethelstane is wounded and presumed dead while attempting to rescue Rebecca, whom he mistakes for Rowena.
Rebecca's trial and Ivanhoe's reconciliation
Following the battle, Locksley plays host to King Richard. Word is also conveyed by de Bracy to Prince John of the King's return and the fall of Torquilstone. In the meantime, Bois-Guilbert rushes with his captive to the nearest Templar Preceptory, where Lucas de Beaumanoir, the Grand-Master of the Templars, takes umbrage at Bois-Guilbert's infatuation, and subjects Rebecca to a trial for witchcraft. At Bois-Guilbert's secret request, she claims the right to trial by combat; and Bois-Guilbert, who had hoped for the position, is devastated when the Grand-Master orders him to fight against Rebecca's champion. Rebecca then writes to her father to procure a champion for her. Cedric organises Aethelstane's funeral at Coningsburgh, in the midst of which the Black Knight arrives with a companion. Cedric, who had not been present at Locksley's carousal, is ill-disposed towards the knight upon learning his true identity; but Richard calms Cedric and reconciles him with his son. During this conversation, Aethelstane emerges – not dead, but laid in his coffin alive by monks desirous of the funeral money. Over Cedric's renewed protests, Aethelstane pledges his homage to the Norman King Richard and urges Cedric to marry Rowena to Ivanhoe; to which Cedric finally agrees.
Soon after this reconciliation, Ivanhoe receives word from Isaac beseeching him to fight on Rebecca's behalf. Accordingly, Ivanhoe overcomes Bois-Guilbert but does not kill him, and the Templar dies of internal causes which is pronounced by the Grand Master as the judgement of God and proof of Rebecca's innocence. King Richard then punishes the Templars and their allies against himself.
Fearing further persecution, Rebecca and her father leave England for Granada. Before leaving, Rebecca comes to bid Rowena a fond farewell. Finally, Ivanhoe and Rowena marry and live a long and happy life together, though the final paragraphs of the book note that Ivanhoe's military service ended with the death of King Richard.