The novel is set in the early years of the 19th century. Silas Marner, a weaver, is a member of a small Calvinist congregation in Lantern Yard, a slum street in an unnamed city in Northern England. He is falsely accused of stealing the congregation's funds while watching over the very ill deacon. Two clues are given against Silas: a pocket-knife and the discovery in his own house of the bag formerly containing the money. There is the strong suggestion that Silas' best friend, William Dane, has framed him, since Silas had lent his pocket-knife to William shortly before the crime was committed. Silas is proclaimed guilty. The woman he was to marry casts him off, and later marries William Dane. With his life shattered and his heart broken, Silas leaves Lantern Yard and the city.
Marner heads south to the Midlands and settles near the village of Raveloe, where he lives as a recluse, lapsing into bouts of catalepsy, and existing only for work and the gold he has hoarded from his earnings. The gold is stolen by Dunstan ('Dunsey') Cass, the dissolute younger son of Squire Cass, the town's leading landowner. Silas sinks into a deep gloom, despite the villagers' attempts to aid him. Dunsey disappears, but little is made of this not unusual behaviour, and no association is made between him and the theft.
Godfrey Cass, Dunsey's elder brother, also harbours a secret. He is married to, but estranged from, Molly Farren, an opium-addicted woman of low birth. This secret threatens to destroy Godfrey's blooming relationship with Nancy, a young woman of higher social and moral standing. On a winter's night, Molly tries to make her way into town with her two-year-old child, to prove that she is Godfrey's wife and ruin him. On the way she takes opium, becomes disoriented and sits down to rest in the snow, child in arm. The child wanders from her mother's still body into Silas' house. Upon discovering the child, Silas follows her tracks in the snow and discovers the woman dead. Godfrey also arrives at the scene, but resolves to tell no one that she was his wife.
Silas decides to keep the child and names her Eppie, after his deceased mother and his sister, Hephzibah. Eppie changes Silas' life completely. Silas has been robbed of his material gold, but has it returned to him symbolically in the form of golden-haired Eppie. Godfrey Cass is now free to marry Nancy, but continues to conceal the existence of his first marriage—and child—from her. However, he aids Marner in caring for Eppie with occasional financial gifts. More practical help and support in bringing up the child is given by Dolly Winthrop, a kindly neighbour of Marner's. Dolly's help and advice help Marner not only to bring up Eppie but also to integrate her into village society.
Sixteen years pass, and Eppie grows up to be the pride of the town. She has a strong bond with Silas, who through her has found inclusion and purpose in life. Meanwhile, Godfrey and Nancy mourn their own childless state. Eventually, the skeleton of Dunstan Cass—still clutching Silas' gold—is found at the bottom of the stone quarry near Silas' home, and the money is duly returned to Silas. Shocked by this revelation, and coming to the realisation of his own conscience, Godfrey confesses to Nancy that Molly was his first wife and that Eppie is his child. They hope to raise her as a gentleman's daughter, which for Eppie would mean forsaking Silas. Eppie politely refuses, saying, "I can't think o' no happiness without him."
Silas is never able to clear up the details of the robbery that caused his exile from Lantern Yard, as his old neighbourhood has been "swept away" and replaced by a large factory. No one seems to know what happened to Lantern Yard's inhabitants. However, Silas contentedly resigns himself to the fact that he now leads a happier existence among his family and friends. In the end, Eppie marries a local boy, Aaron, son of Marner's helpful neighbour Dolly. Aaron and Eppie move into Silas' new house, courtesy of Godfrey. Silas' actions through the years in caring for Eppie have provided joy for everyone and the extended family celebrates its happiness.