Charles, a 30-year-old independently wealthy Londoner with an amateur interest in paleontology, is engaged to the stylish socialite Ernestina. Both are staying in Lyme Regis: she, because of her parents' strict wish that she recover from an imagined consumptive disease, and he to be with her. The novel opens with the two of them walking on the famous Lyme Bay Cobb, a stone quay, at the end of which sits a mysterious black-cloaked figure.
The figure is Sarah, commonly known as "Tragedy," or "the French Lieutenant's Woman." She has a bad reputation in Lyme Regis because of her scandalous affair with a French sailor who was shipwrecked in England and came to stay with the family whose children she was tutoring. The story goes that he promised to marry her, and she followed him to Weymouth, where she was seduced and abandoned. Whenever she can, she goes to sit at the end of the quay to look for her French lover, and wait for him to return. At the time Sarah encounters Ernestina and Charles on the Cobb, she has been living with Mrs. Poulteney for a year, acting as a companion and charitable ward of the pious and vaguely sadistic old lady.
Charles is struck by the absolute sorrow on Sarah's face, but more or less puts her from his mind until he runs into her again, when he is searching for fossils on a piece of wild land called Ware Commons. Sarah is sleeping; he approaches and wakes her. She does not respond to his apologies, and later that day, when they meet again, she firmly asks to be left to walk in peace. Sarah, upon returning home, is chastised by Mrs. Poulteney for walking in a place with such a bad reputation; that night she cries and contemplates suicide but does not jump.
Charles, Ernestina, and Ernestina's Aunt Tranter visit Mrs. Poulteney, and Sarah sits by in silence while the others discuss the impropriety of the blossoming romance between Charles' manservant, Sam, and the bubbly and feisty Mary, Ernestina's aunt's maid. Charles sides with the servants—he and Ernestina quarrel but quickly make up, and spend five uneventful days together. Charles finds himself becoming increasingly dissatisfied with the smallness of the society life he is leading, and he wonders whether he isn't making too conventional choice by marrying Ernestina and settling down with her.
Charles and Sarah keep on bumping into each other when Charles is hunting for fossils and Sarah is walking by the coast. Charles is fascinated by her and feels pity for her; one time when they meet, he offers to help her find a job somewhere away from Lyme Regis, so that she can get back on her feet. She refuses this offer. The next time she is out walking she follows him and asks him to listen to her: she wants to tell him everything that happened with the French lieutenant. He is reluctant to cross this line of respectability, but during a later encounter he hears the 'full story' of how she fell in love with Varguennes and "gave herself" to him, even after she realized that he would never marry her. The sexual tension builds between Charles and Sarah; he cannot help but imagine the scene in his mind. Despite - and because of - his attraction to Sarah, Charles advises her to leave Lyme Regis, and says that he will help pay for her travel. Sarah agrees to go, and Charles insists that they never meet alone again.
An urgent telegram arrives from Charles' uncle, demanding that Charles come visit. He learns that Uncle Robert plans to marry a younger woman, and that if she produces an heir, Charles will no longer inherit the family estate. Ernestina is furious, and Charles is also upset - he will now have to be financially dependent on his future wife.
When Charles returns to Lyme, he receives the news that Sarah Woodruff has been dismissed from Mrs. Poulteney's service, and that she has disappeared. He receives a desperate note from her, begging for one last meeting. Unsure of how to proceed, Charles visits Dr. Grogan, who offers to deal with the matter himself by meeting Sarah and bringing her to a private asylum to cure her melancholia. Charles returns home and broods about Sarah's treachery, but soon realizes that he and Dr. Grogan have both misjudged her. Desperate to make amends and to exert some free will over a situation in which he feels helpless, Charles sets out to find Sarah.
Charles finds Sarah asleep in a barn. They kiss, and Charles pushes Sarah violently away - as he rushes away from the barn, he meets Sam and Mary, and asks Sam not to mention this encounter to anyone. Charles returns to Sarah, and leaves her some money on the understanding that she will leave Lyme Regis and seek employment elsewhere. They say goodbye for what is ostensibly the last time.
When he arrives back in town, Charles visits Ernestina and explains that he must go back to London to discuss financial matters with her father; meanwhile, Sarah leaves Lyme and settles into her new life in Exeter. Charles' meeting with Ernestina's father ends with Mr. Freeman inviting his son-in-law to consider going into the Freeman family business - an idea which shocks Charles' aristocratic nature. That evening, Charles goes to his club and gets incredibly drunk. He and his friends visit a brothel, but Charles leaves early in a taxi. On the way home, he stops a prostitute who reminds him vaguely of Sarah Woodruff. He pays her and they take the taxi back to her apartment, where Charles becomes sexually aroused but then vomits on the bed after learning that the prostitute's name is also Sarah. She takes care of him and he wakes up in his own bed the following morning, very hung-over. Charles receives a note from Sarah Woodruff containing her new Exeter address.
On the train from London to Exeter, where he should change to go to Lyme Regis, Charles thinks about his future. He plans out the whole thing in his head: his dull marriage to Ernestina, their children, and his eventual involvement in Mr. Freeman's business. In an attempt to avoid this dire future, he tells Sam that they are staying the night in Exeter, and he goes to Sarah Woodruff's hotel. The tension between him and Sarah when he goes up to her room is unbearable; Charles clasps her to him and covers her with kisses. He undresses and penetrates her, ejaculating on impact. Afterwards, Charles notices a bloodstain on his shirt. He realizes that Sarah has lied about her affair with the French lieutenant: she is a virgin, or was, until Charles deflowered her. Charles is racked by guilt toward Ernestina and her father, and anger toward Sarah - why has she lied to him? Is she trying to manipulate him? Sarah will not answer his questions regarding her motives. She only says that she loves him, and she doesn't expect him to leave Ernestina for her. Charles storms out of the room.
Charles walks around Exeter, until he comes to a church and goes in to pray, despite being an atheist. After long self-examination, Charles realizes that he wants to live without caring what others around him think, and he imagines what it would be like to marry Sarah. He returns to his hotel and writes her a love letter, which he entrusts to Sam. Sam, thinking of how Charles' and Sarah's relationship would affect his prospects of marrying Mary and opening his own clothes store, chooses not to deliver the letter, and tells Charles that there was no response from Sarah.
Charles travels to Lyme Regis to break the news to his fiancée. Ernestina is predictably furious, and threatens that her father will drag Charles' name through the mud. She falls into a swoon, and Charles goes to fetch Dr. Grogan, who reproaches him harshly when he hears what Charles has done and says that he must spend the rest of his life doing penance for the harm he has caused.
When Charles tries to call on Sarah at the Endicott Family Hotel, he is told that she has left for London, without giving an address. After Charles signs a statement of guilt for Ernestina's father, in which he renounces his right to be called a gentleman, Charles spends time trying to find Sarah, to no avail. He eventually leaves for Europe, and spends almost two years roaming from country to country. Although he has been dreaming of traveling, Charles is far from happy - he realizes that he wanted to leave England with Sarah, and that exile without her is boring and meaningless. Eventually, Charles travels across the Atlantic to America, which he enjoys more than Europe: at least he is not bored anymore. One day, while in New Orleans, Charles gets a telegram from his lawyer in London: Sarah has been found.
In the first ending to the novel, the narrator describes Charles' visit to the address given by the anonymous source. Charles is let into a relatively nice house, and recognizes the artist Rossetti as he climbs the stairs to find Sarah. Sarah is dressed like a modern woman, and she tells Charles that she is Rossetti's assistant and model - there is nothing sexual or romantic in their relationship. Charles begs Sarah to come marry him, but she says she doesn't want to marry anyone - she is very happy with the life she is leading. Charles suspects that she is still suffering; he begins to angrily accuse her of bringing him there to torment him. Sarah calmly tells him that he misunderstands her. There is someone, she says, whom he should meet. Charles reluctantly agrees, and a small girl child is brought to him - he understands that she was conceived during his first and only sexual encounter with Sarah. Charles and Sarah embrace, and it seems - although we are not told explicitly what will happen - that the two will stay together.
The second ending begins with the author appearing outside Rossetti's house and rewinding the hands of a pocket watch by fifteen minutes, before leaving in a carriage. We are taken back to the point in Sarah and Charles' conversation where he accuses her of lying to him in order to hurt him. He starts to leave - Sarah touches his arm to restrain him - but he storms out of the room and out of the house. At the very end of the novel, he comes to the conclusion that life must be endured, no matter how empty or seemingly hopeless it is, and that there is no 'quick fix' that will make everything all right.