The story is set in a town named Ayemenem, now part of Kottayam district in Kerala, India. The temporal setting shifts back and forth between 1969, when fraternal twins Rahel and Esthappen are seven years old, and 1993, when the twins are reunited at age of 31. Malayalam words are liberally used in conjunction with English. Facets of Kerala life captured by the novel are communism, caste system, and the Keralite Syrian Christian way of life.
Without sufficient dowry for a marriage proposal, Ammu Ipe is desperate to escape her ill-tempered father, Pappachi, and her bitter, long-suffering mother, Mammachi. She finally convinces her parents to let her spend a summer with a distant aunt in Calcutta. To avoid returning to Ayemenem, she marries a man who assists managing a tea estate. She later discovers that he is an alcoholic who physically abuses her and attempts to pimp her to his boss to keep his job. She gives birth to Rahel and Estha, leaves her husband, and returns to live with her father, mother and brother, Chacko, in Ayemenem. Following his divorce from an English woman (Margaret) and the death of their father, Chacko returns to India (from Oxford) to run the family business.
The multi-generational/extended family home in Ayemenem also includes Pappachi's sister, Baby Kochamma, whose given name is Navomi Ipe. As a young girl, Baby Kochamma fell in love with Father Mulligan, a young Irish priest who had come to Ayemenem to study Hindu scriptures. To get closer to him, Baby Kochamma had converted to Roman Catholicism and joined a convent against her father's wishes. After a few lonely months in the convent, Baby Kochamma had realised that her vows brought her no closer to the man she loved. Her father eventually rescued her from the convent and sent her to America for an education, where she obtained a diploma in ornamental gardening. Due to her unrequited love with Father Mulligan, Baby Kochamma remained unmarried for the rest of her life, becoming embittered over time. Throughout the book, Baby Kochamma delights in the misfortune of others and manipulates events to bring down calamity on both Ammu and the twins.
|“||"It didn't matter that the story had begun, because Kathakali discovered long ago that the secret of the Great Stories is that they have no secrets. The Great Stories are the ones you have heard and want to hear again. The ones you can enter anywhere and inhabit comfortably. They don't deceive you with thrills and trick endings."||”|
The death of Margaret's second husband in a car accident prompts Chacko to invite both her and Sophie (Chacko's daughter from the brief marriage) to spend Christmas in Aymanam. The day before Margarget and Sophie arrive, the family visits a theatre to see The Sound of Music, where Estha is molested by the "Orangedrink Lemondrink Man," a vendor working the snack counter of the theatre. Estha's experience factors into the tragic events at the heart of the narrative. The family (Chacko, Ammu, Estha, Rahel, and Baby Kochamma) encounters a group of communist protesters on the way to pick up Margaret and Sophie from the airport.. The protesters surround the car and force Baby Kochamma to wave a red flag and chant a communist slogan, humiliating her. Rahel thinks she sees Velutha, an Untouchable servant that works for the pickle factory, amongst the protesters. Velutha's alleged presence with the communist mob causes Baby Kochamma to associate him with her humiliation at the mob's hands, and she begins to harbour a deep hatred towards him. Velutha is an Untouchable (the lowest caste in India), a dalit, and his family has served the Ipes for generations. Velutha is an extremely gifted carpenter and mechanic. His skills in repairing the machinery make him indispensable at the pickle factory, but result in resentment and hostility from the other untouchable factory workers. Rahel and Estha form an unlikely bond with Velutha and come to love him, despite his status as a pariah. It is her children's love for Velutha that causes Ammu to realise her attraction to him and, eventually, she comes to "love by night the man her children love by day". They begin a short-lived affair that culminates in tragedy for the family.
When her relationship with Velutha is discovered, Ammu is locked in her room and Velutha is banished. In her rage, Ammu blames the twins for her misfortune and calls them the "millstones around her neck". Distraught, Rahel and Estha decide to run away. Their cousin, Sophie Mol, convinces them to take her with them. During the night, while trying to reach the abandoned house across the river, their boat capsizes and Sophie drowns. Once Margaret Kochamma and Chacko return from Cochin, where they have been picking up airline tickets, she sees Sophie's body laid out on the sofa. Margaret vomits and hysterically berates the twins, as they had survived, and hits Estha.
Baby Kochamma goes to the police and accuses Velutha of being responsible for Sophie's death. She claims that Velutha attempted to rape Ammu, threatened the family, and kidnapped the children. A group of policemen hunt Velutha down and savagely beat him for crossing caste lines. The twins witness the horrific scene and are deeply disturbed. When the twins reveal the truth of Sophie's death to the Chief of Police, he is alarmed. He knows that Velutha is a communist, and is afraid that the wrongful arrest and beating will cause unrest among the local communists. He threatens to hold Baby Kochamma responsible for falsely accusing Velutha. To save herself, Baby Kochamma tricks Rahel and Estha into accusing Velutha of Sophie's death. Velutha dies of his injuries. Hearing of his arrest, Ammu goes to the police to tell the truth about their relationship. The police threaten in order to make her leave the matter alone. Afraid of being exposed, Baby Kochamma convinces Chacko that Ammu and the twins are responsible for his daughter's death. Chacko kicks Ammu out of the house. Unable to find a job, Ammu is forced to send Estha to live with his father. Estha never sees Ammu again, and she dies alone and impoverished a few years later at the age of thirty-one.
After a turbulent childhood and adolescence in India, Rahel goes to America to study. While there, she marries, divorces and, ultimately, returns to Ayemenem after several years of working dead-end jobs. Rahel and Estha, both 31-years-old, are reunited for the first time since they were children. In the intervening years, Estha and Rahel have been haunted by their guilt and grief-ridden pasts. Estha is perpetually silent and Rahel has a haunted look in her eyes. It becomes apparent that neither twin ever found another person who understood them in the way they understand each other. The twins' renewed intimacy is consummated in them sleeping together.