In Camelot on New Year's Day, King Arthur's court is exchanging gifts and waiting for the feasting to start when the king asks first to see or hear of an exciting adventure. At this a gigantic figure, entirely green in appearance and riding a green horse, rides unexpectedly into the hall. He wears no armour but bears an axe in one hand and a holly bough in the other. Refusing to fight anyone there on the grounds that they are all too weak to take him on, he insists he has come for a friendly "Christmas game": someone is to strike him once with his axe on condition that the Green Knight may return the blow in a year and a day. The splendid axe will belong to whomever takes him on. Arthur himself is prepared to accept the challenge when it appears no other knight will dare, but Sir Gawain, youngest of Arthur's knights and his nephew, begs for the honour instead. The giant bends and bares his neck before him and Gawain neatly beheads him in one stroke. However, the Green Knight neither falls nor falters, but instead reaches out, picks up his severed head and remounts, holding up his bleeding head to Queen Guinevere while its writhing lips remind Gawain that the two must meet again at the Green Chapel. He then rides away. Gawain and Arthur admire the axe, hang it up as a trophy and encourage Guinevere to treat the whole matter lightly.
As the date approaches, Sir Gawain sets off to find the Green Chapel and keep his side of the bargain. Many adventures and battles are alluded to (but not described) until Gawain comes across a splendid castle where he meets Bertilak de Hautdesert, the lord of the castle, and his beautiful wife, who are pleased to have such a renowned guest. Also present is an old and ugly lady, unnamed but treated with great honour by all. Gawain tells them of his New Year's appointment at the Green Chapel and that he only has a few days remaining. Bertilak laughs, explains that the Green Chapel is less than two miles away and proposes that Gawain rest at the castle till then. Relieved and grateful, Gawain agrees.
Before going hunting the next day Bertilak proposes a bargain: he will give Gawain whatever he catches on the condition that Gawain give him whatever he might gain during the day. Gawain accepts. After Bertilak leaves, Lady Bertilak visits Gawain's bedroom and behaves seductively, but despite her best efforts he yields nothing but a single kiss in his unwillingness to offend her. When Bertilak returns and gives Gawain the deer he has killed, his guest gives a kiss to Bertilak without divulging its source. The next day the lady comes again, Gawain again courteously foils her advances, and later that day there is a similar exchange of a hunted boar for two kisses. She comes once more on the third morning, this time offering Gawain a gold ring as a keepsake. He gently but steadfastly refuses but she pleads that he at least take her belt, a girdle of green and gold silk which, the lady assures him, is charmed and will keep him from all physical harm. Tempted, as he may otherwise die the next day, Gawain accepts it, and they exchange three kisses. That evening, Bertilak returns with a fox, which he exchanges with Gawain for the three kisses – but Gawain says nothing of the girdle.
The next day, Gawain leaves for the Green Chapel with the girdle wound twice around his waist. He finds the Green Knight sharpening an axe and, as promised, Gawain bends his bared neck to receive his blow. At the first swing Gawain flinches slightly and the Green Knight belittles him for it. Ashamed of himself, at the Green Knight's next swing Gawain does not flinch; but again the full force of the blow is withheld. The knight explains he was testing Gawain's nerve. Angrily Gawain tells him to deliver his blow and so the knight does, causing only a slight wound on Gawain's neck. The game is over. Gawain seizes his sword, helmet and shield, but the Green Knight, laughing, reveals himself to be the lord of the castle, Bertilak de Hautdesert, transformed by magic. He explains that the entire adventure was a trick of the 'elderly lady' Gawain saw at the castle, who is actually the sorceress Morgan le Fay, Arthur's sister, who intended to test Arthur's knights and frighten Guinevere to death. Gawain is ashamed to have behaved deceitfully but the Green Knight laughs at his scruples and the two part on cordial terms. Gawain returns to Camelot wearing the girdle as a token of his failure to keep his promise. The Knights of the Round Table absolve him of blame and decide that henceforth that they will wear a green sash in recognition of Gawain's adventure.