A narrator, a fictional character named Geoffrey Crayon, begins the story. He tells us that, years ago, a few miles from Boston, Massachusetts, Kidd the Pirate buried a great amount of treasure. He made a deal with the devil to protect the treasure, but was never able to return to it, as he was captured and taken to England to be hanged as a pirate. Much later, in the year 1727, a miserly man named Tom Walker lives near the area with his wife, who is equally as money-crazed. They are not popular with their neighbors, as they often fight.
After spending the day in a distant part of the neighborhood, Tom Walker takes a shortcut back home through a swamp. He reaches an abandoned Indian fort, and after kicking a nearby skull left over from the Indian wars with colonists, angers a tall man covered in soot who had apparently been watching him. Tom realizes that this is the man commonly called Old Scratch, and after a long conversation on the way home, Old Scratch announces that he has taken a liking to Tom and will allow him to acquire Kidd the Pirate's treasure on certain conditions. As a promise to stand by his word, Old Scratch presses his finger into Tom's forehead, leaving a black, burned mark that he calls his "signature."
Tom can't help but share the secret with his wife, who is immediately enticed by the promise of gold; only to contradict her, however, Tom tells her he isn't planning on taking the deal. Determined to follow through on the deal herself, she takes all the valuables in their house as bribes for Old Scratch and sets off to find him. She never returns.
Tom sets out to find both his wife and the valuables she disappeared with, and instead finds her heart and liver tied up to a tree in her checked apron. Tom is more upset by the loss of the valuables than the loss of his wife; in fact, he uses the latter as consolation, and acknowledges that Old Scratch has actually done him a service by getting rid of her.
Finally Tom decides he wants the treasure he was promised, and he sets out to find Old Scratch once again. The two haggle for a while, and Old Scratch insists that if he is to give Tom the money, Tom must use it in service to the devil. He first suggests Tom should fit out a slave ship, but Tom outright refuses to be turned into a slave trader. Then he proposes that Tom become a usurer, or corrupted money-loaner; this is right up Tom's alley, so he agrees.
Tom takes the money and sets up as a usurer in Boston, becoming popular with adventurers, speculators, and merchants looking to borrow money to begin their ventures. He loans to them and then soaks them dry with his interests rates, and builds with his wealth a lavish house for himself (but doesn't finish or furnish it, since he's still his stingy old self). As he grows older, though, he worries that the bargain he made with Old Scratch will result in being damned in the afterlife, so he becomes a religious zealot, attending church and praying to get back in the good graces of God.
But it is too late for redemption. When a poor land-jobber visits Tom and asks him to please give him more time to pay off his loan before foreclosing his mortgage, Tom refuses. The man says that Tom has made so much money off him already, and when Tom says "the devil take me if I have made a farthing!" a black man on a black horse knocks on his door, come to take him away. Tom Walker is gone for good, and when trustees go to claim his assets, they find that all his possessions—including his house—have gone up in flames.