The novel begins with a description of Audley Court, an old and picturesque house in the county of Essex in England. It is the home of Sir Michael Audley, his daughter Alicia, and his second wife. Sir Michael is a baronet, who has married for a second time at age 55, seventeen years after the death of his first wife. The woman he married is named Lucy Graham. Prior to her marriage, the wife of the village surgeon, Mrs. Dawson, had employed her: she had acted as a governess to Mrs. Dawson’s daughters. Lucy is very beautiful and charms everyone she meets; after seeing her at church, Sir Michael fell very strongly in love. When Sir Michael proposed, Lucy gave a strange speech about how she could not be expected to resist the offer he was making, and then accepted his proposal. A number of small details suggest that Lucy may have been hiding a secret, possibly related to a child or a previous marriage.
Meanwhile, George Talboys is onboard a ship sailing from Sydney, Australia to Liverpool, England. George is returning to his wife after three and a half years. George had been a soldier stationed at a seaport town when he met his future wife. Her father was poor and had a drinking problem, and hoped to marry his daughter to a wealthy military man. George fell in love and married her, but although he came from a wealthy family, he was disowned when his father learned that he had married a girl without a fortune. George tried unsuccessfully to find work, with the situation growing more desperate now that his wife had given birth to a son. He and his wife argued about money and he left the house so upset that he considered committing suicide. Instead, he overheard a conversation about the Australian goldfields and decided to secretly travel to Australia, make money, and then return. He left a short note for his wife, explaining his plan, and departed. After much suffering in Australia, he discovered a large gold deposit that earned him a large sum of money. He is now returning to his wife; during his absence, he only sent her one letter, in which he told her he was returning and provided her with the address she could use to contact him.
When George arrives in London, he runs into an old friend, Robert Audley, Sir Michael’s nephew. Robert is technically employed as a barrister in London, but spends very little time working. When George and Robert go to the location where George directed his wife to write to him, George is upset to learn that there is no letter for him. He picks up a newspaper and reacts with horror to the announcement of the death of Helen Talboys–his wife. The next day, Robert and George travel to the town of Ventnor, which is where the announcement said that Helen died, and meet with her father, Captain Maldon, and George and Helen’s young son, little George. While a few of the details surrounding her death seem surprising, George is preoccupied with his grief. He decides to leave his son in Captain Maldon’s care, with Robert as legal guardian, as George plans to return to Australia as soon as possible. However, Robert persuades him travel to St Petersburg with him instead.
After a year abroad, the action resumes in the early autumn of 1858. Robert and George plan to travel to Audley Court to take part in the hunting season. They learn at the last minute that there will not be room for them at the house, since Alicia reports that Lady Audley has already invited many other guests. They decide to travel to the town of Audley anyways, and stay at the inn there, fishing instead of hunting. Shortly after they arrive, Lady Audley receives a telegram: her old teacher Mrs. Vincent is very ill in London, and wants to see her. Lady Audley and Sir Michael quickly leave for London, preventing George from having the opportunity to meet them. Alicia, who harbors romantic feelings for her cousin Robert, is disappointed when he is unresponsive. With little to do, George and Robert begin to grow bored and decide to return to London. Before they go, Alicia invites them to go over to Audley Court so that Alicia can show them around before they leave. The two men enter Lady Audley’s dressing room and view a portrait of Lady Audley that highlights her beauty, but also gives her a sinister quality. George seems astonished by the portrait, but does not say why. The next day, September 7th, Robert falls asleep while fishing and George makes his way to Audley Court. When he arrives, the only person at home is Lady Audley, who had returned the previous evening and learned from Alicia that the two men had been in her dressing room and seen her portrait. Robert wakes up and cannot find George. Robert initially decides that George must have headed back to London by himself. However, he still feels somewhat anxious, and a bruise he sees on the wrist of Lady Audley makes him even more anxious.
Robert returns to London the following day and learns that George has not returned there. He goes directly to Captain Maldon’s house in case George has gone there to see his son. Although George is not at the house, Mr. Maldon says that he saw George the previous night. George had appeared late at night, briefly seen his son, and then explained that he was continuing on to Liverpool to catch a ship departing for Australia. However, Robert glimpses a telegram that seems to have instructed Captain Maldon to tell this story. He is also confused to learn that George was not listed as a passenger on the ship that recently departed. Meanwhile, Lady Audley’s maid, Phoebe Marks, and Phoebe’s husband, Luke, are secretly blackmailing her because they have uncovered incriminating information about her. They use the money she gives them to buy the Castle Inn. At Christmas time Robert returns to Audley Court and tells Lady Audley that he is still investigating George’s disappearance, which seems to upset her.
Robert becomes increasingly suspicious due to additional conversations with Luke Marks, and strange behavior on Lady Audley’s part. He is eventually able to find a sample of Helen Talboys’ handwriting and verify that it is the same as Lady Audley’s, heightening his suspicions that the two women are the same person. He removes little George from Captain Maldon’s custody, and then goes to visit George’s father and sister to reveal what he has learned so far. While Mr. Talboys is unimpressed and does not think foul play is involved in George’s disappearance, Clara Talboys begs Robert to keep trying to find out what happened to her brother. As time goes by, Robert is able to uncover more damning evidence about Lady Audley’s deceit. Helen Talboys left her husband and son on August 16, 1854. A day or two later, a young woman by the name of Lucy Graham arrived at a school in London looking to work there as a teacher, but provided very little information about her past. Descriptions of the two women’s appearances are remarkably similar. Robert eventually confronts Lady Audley, saying he is suspicious about George’s disappearance and is beginning to suspect that Helen Talboys was not actually dead when George returned to England. He tells her that when George found gold and began his journey back to England from Australia, news of this was published in the paper, and therefore someone would have known that his return was imminent. He gives his theory: Helen Talboys had faked her death, conspiring with Captain Maldon, since she had taken on a new identity and did not want to be discovered when her husband returned.
Lady Audley becomes very upset and threatens to persuade people that Robert is insane in order to discredit these accusations. While she has some success broaching this idea with Sir Michael, she still feels very fearful that Robert will expose her. She is also unhappy that Phoebe and Luke are still blackmailing her, and she is running out of money. Desperate, when she learns that Robert is spending the night at the Castle Inn, she decides to set it on fire, hoping to kill both Robert and Luke in the process. Lady Audley successfully sets fire to the inn, but learns the next day that Robert survived because he had not actually been sleeping in his designated room. Finding it cold and damp, he had slept in a small room on the main floor instead. Because he was there, he woke up and helped the servants and Luke escape, though Luke is badly burned. Robert confronts Lady Audley at Audley Court and says that he will now reveal her identity unless she chooses to confess to Sir Michael.
Lady Audley says that she is mad, and did indeed kill George; she asks Robert to get Sir Michael. Robert brings Sir Michael and Lucy (i.e. Lady Audley) begins her story. She grew up in poverty as Helen Maldon, not knowing the whereabouts of her mother, with a father who was frequently absent, and an indifferent nurse to take care of her. Finally Lucy discovered that her mother was mad and was institutionalized. This story is very different from what Sir Michael was previously told.
When Lucy was ten, she visited her mother in the asylum and learned that her illness was hereditary: Lucy could expect to someday go mad as well. Ashamed, she hid this secret once she was sent away to school. When she was seventeen, she left school and went to live with her father at Wildernsea, but they were still poor, and she had little to look forward to. She was charmed by the handsome George Talboys, and married him in hopes that he could give her a better future. However, she was rapidly disappointed when he no longer had an income; after the birth of their son, they argued and he left for Australia. She was left angry and resentful, and struggling to provide an income for herself, her child, and her father. Desperate, she decided to run away to London and try to create a new life for herself. She responded to an advertisement posted by Mrs. Vincent, and assumed a false name. While living as Lucy Graham, she was hired by the Dawson family, and then married to Sir Michael. She justifies this by saying she believed, with just cause, that her husband might well be dead. However, shortly after her marriage, she saw in the paper that George was returning to England. She knew he would not rest until he found her, so she decided to fake her death, with her father’s help. She meets Mrs. Plowson, who was looking after little George. She discovered that Mrs. Plowson’s daughter, Matilda, who was approximately the same age, and also petite and blonde, was close to death. Lady Audley arranged for her father to rent rooms in Ventnor for himself, his dying daughter, and his grandson. Matilda was introduced to everyone as Helen Talboys, and when she died, her death was recorded under the same name.
After the end of her story, Sir Michael walks away without saying a word, and immediately arranges to go abroad with Alicia.
Robert gets a referral for Dr. Mosgrave, a doctor who specializes in mania, and the doctor comes to examine Lady Audley. After hearing the story and speaking with her, he gives Robert his diagnosis: she is not mad, but she influenced by heredity. He pronounces her dangerous. He also tells Robert, however, that Lady Audley cannot be found guilty of murder, since firstly George’s death cannot even be proven, and secondly there is no evidence against her beyond motive. Robert’s biggest concern is avoiding a public scandal. Dr. Mosgrave writes to Monsieur Val, who runs an institution for the mentally ill in Belgium. Dr. Mosgrave recommends placing Lady Audley in this institution, since he believes she could commit violent acts. Robert accompanies Lady Audley to Belgium and commits her to the madhouse. Lady Audley expresses her rage at finding herself in such a place and tells Robert that George Talboys’ body can be found at the bottom of the old well at Audley Court. On September 7th, he had approached her alone on the grounds. She had hoped to bribe him to conceal her identity but he was too outraged and hurt to take her money. He threatened to reveal her identity by bringing witnesses; in rage and desperation, she pulled a loose part from the wooden structure he was leaning on, sending him falling into the well. She tells Robert that she can make this confession now because she knows he would never risk shaming his uncle by involving her in a criminal trial. Robert leaves in horror and shock, at a loss because retrieving George’s body will invariably lead to a legal investigation and reveal Lady Audley’s crime.
Back in England, Robert receives a letter asking him to come and see Luke Marks, who is dying of his injuries from the fire. When he arrives, Luke brings up the topic of George in conversation. Robert assumes that Luke is going to tell him what he has already discovered about Lady Audley’s involvement in his death and tells him there is no need to recount the story again. Luke, however, continues to express a need to get a secret off of his chest. He asks his mother to recall an evening in the autumn where Luke had brought to her an injured man, covered in wet and muck, clearly in shock after some trauma. Robert realizes that his friend survived the fall into the well. Luke explains that he found George lying injured and helped him to get medical aid, and then helped him continue on to Liverpool. However, when Luke realizes that Lady Audley believes she killed George, he decides it is in his best interest not to tell Lady Audley that George is alive, and to blackmail her instead. Luke dies a short time later, and Robert writes to Lady Audley to tell her that George survived and she is not guilty of murder after all. Shortly afterwards, Robert and Clara become engaged. They plan to sail to Australia together to look for George. However, when Robert goes to London to make arrangements, he finds George waiting for him. George explains that he was able to climb out of the well by relying on some jagged rocks, and had then been assisted by Luke Marks. After leaving Audley, George actually sailed to New York and eventually returned because he was lonely and missed Robert. At the end of the novel, Robert and Clara are happily married with a small child. George lives with them, and little George comes to visit them frequently. Lady Audley died in Belgium. Sir Michael and Alicia no longer live at Audley Court, and the house is shut up. Alicia is engaged, and everyone is happy and at peace.