The House of the Spirits opens with the del Valle family gathered together in church on Holy Thursday. Father Restrepo pronounces young Clara possessed by the devil. The body and possessions of Uncle Marcos are dropped off at the del Valle household, and Clara takes Barrabas, Uncle Marcos's dog, as her own. Esteban Trueba wins Rosa's hand, but before they can be married, she is poisoned to death by accident in place of Severo. After witnessing Rosa's autopsy, Clara resolves not to speak for nine years.
The story shifts to Esteban's family life. His sister, Férula, is sacrificing her youth to care for their ailing mother, Doña Ester. After spending many months mining, Esteban decides to raise the old family hacienda, Tres Marias, out of ruin. He succeeds in restoring the estate to its former glory, but is unfair to his peasant employees and rapes their young women, including Pancha García, who becomes pregnant with the first of many illegitimate children whom Esteban refuses to acknowledge. Esteban has his first tryst with the prostitute Transito Soto at a brothel called the Red Lantern. He lends her fifty pesos to travel to the capital and make a better life for herself.
Clara spends most of her childhood in silence, accompanying her mother on her suffragette missions throughout the city. On her nineteenth birthday Clara finally speaks. She announces that she will soon be married to Esteban Trueba. He arrives shortly after to ask for Clara's hand, and she accepts. Barrabas dies from a butcher knife to the back during Clara and Esteban's engagement party. After their wedding, Esteban builds their mansion, which comes to be known as "the big house on the corner," and Férula moves in with them. Soon, Clara announces that she is pregnant with a girl named Blanca. Blanca is considered "the first normal person in generations" in the Trueba family because she is not inclined to communicate with spirits. From the family's first visit to Tres Marias, she develops an unshakeable bond with Pedro Tercero García. Esteban heartily disapproves of their friendship, especially when Pedro Tercero begins circulating revolutionary propaganda among the peasants. When Clara sinks into one of her long silences, it becomes evident that she is pregnant again. Right before the twins, Jaime and Nícolas, are born, Nívea and Severo del Valle are killed in a car accident. Clara enlists Férula's help to locate her mother's missing head, which they have to hide in a hat box because the rest of the body is already in the ground. Clara happily resigns herself to living in the spiritual world. Droves of those similarly inclined, including the Mora sisters, join her in her endeavors at "the big house on the corner." Because of her involvement in the spiritual world, Clara does not play a big role in raising her sons. Férula is so passionate about Clara that one day she gives into temptation and curls up in bed with her. When Esteban discovers her there, he banishes his sister from the household, although he continues to send her money through a priest. The Truebas discover that Férula has died when her ghost visits the household to bid farewell to Clara. Clara and Esteban go to collect her body and find that she has been living like a peasant woman, never using the money Esteban sent her.
At Tres Marias, Blanca and Pedro Tercero make love for the first time. They must meet even more secretly when Esteban banishes him from the property for trying to arouse a revolutionary spirit among the peasants. When a great earthquake hits, Esteban is crushed beneath the rubble of the main house, but Old Pedro García manages to heal all of his broken bones. As Esteban recovers, he befriends Count Jean de Satigny. After their experimental chinchilla business fails, Jean becomes enamored of Blanca, who is not interested in him because she loves Pedro Tercero. Jean follows Blanca to the riverbank one night, where he witnesses her affair with Pedro Tercero. When he tells Esteban, the patrÃ³n lashes Blanca and knocks out several of Clara's teeth. Mother and daughter leave Tres Marias and move back to "the big house on the corner." Clara resolves never to speak to Esteban again. Back on the hacienda, little Esteban García betrays Pedro Tercero's whereabouts to Esteban Trueba. Grandfather and illegitimate grandson travel to the fugitive's hiding place, where Esteban Trueba tries to kill Pedro Tercero but succeeds only in cutting off several of his fingers. When the Estebans return to Tres Marias, the older slaps the younger for being a traitor and denies him his promised reward.
Back at the house, it becomes evident that Blanca is pregnant. To cover the scandal, Esteban Trueba forces her to marry Jean de Satigny. Meanwhile, Nícolas has a girlfriend named Amanda, whom his studious brother Jaime secretly loves. After Nícolas begs him, Jaime performs an abortion on Amanda and then cares for her. Blanca and Jean move to a faraway mansion, where she is completely bored but glad that he does not want to have sex with her. Jean occupies himself by spending lavish amounts of money, trafficking Indian artifacts through the house, and spending time in his locked photography studio. After she begins hallucinating, Blanca breaks into Jean's studio and finds that he has been taking kinky photographs of their Indian servants, and may be having a gay relationship with one of them. Just then she goes into labor, but refuses to give birth in the mansion and instead makes the long journey back to "the big house on the corner." As soon as she arrives, she gives birth to Alba, who has Rosa's dark green hair and is supposedly born under the most fortuitous astrological conditions. She has no formal education, but is extremely smart and raised well by all the members of the family. Despite himself, Esteban Trueba has a soft spot for his granddaughter. Alba is raised without a father, and is told that hers was a great count who died in the desert. She meets Pedro Tercero García and spends time with him regularly, but is not told he is her real father. During one of Esteban Trueba and Alba's special visits to Tres Marias, Esteban García comes to the main house to ask the patron for permission and enough money to become a police officer. Remembering how he cheated him out of his reward as a child, Esteban grants him this, not knowing that he has molested Alba moments before.
Back at "the big house on the corner," Clara decides that she has fulfilled her life's purpose and resolves to die. She passes away on Alba's seventh birthday, holding the unafraid little girl's hand. Esteban misses Clara dearly. He commissions a mausoleum where he will be buried alongside Clara and Rosa, and gets Jaime to help him exhume the latter's remains for that purpose. So begins a period of decline in the family's history. In Clara's absence, the house goes slowly to ruin. Nícolas's strange mind-over-matter ways culminate in his staging a protest against his own father outside the gates of Congress. Esteban exiles him from the country, but gives him enough money to support himself. Nícolas ends up gaining a respectful following in North America. Esteban Trueba visits the Christopher Columbus brothel, where he again sleeps with Transito Soto. Afterwards, she consoles him while he weeps with grief for Clara. At the university, Alba falls in love with Miguel, who has become a leftist student leader. She takes part in a revolutionary encampment with him, but is forced to leave by an unusually heavy and painful menstrual flow. Soon after, Alba enlists Jaime to help his old love, Amanda, who has become the victim of a terrible narcotics addiction.
In a massive political upset, the Socialists win the presidency. As part of the country's restructuring, Tres Marias is taken away from Esteban Trueba. Unwilling to comply, he drives to the hacienda where he is taken hostage by his former employees. Blanca enlists the help of Pedro Tercero, now a government official, to save her father. In the process, Alba discovers that Pedro Tercero is her real father. Back at the house, Luisa Mora arrives to predict great calamity, but Esteban angrily dismisses her. Yet her predictions are correct; there is a coup by the political right, and the Terror begins. While Esteban celebrates with champagne, Jaime is captured and tortured for being friends with the Socialist President. When he refuses to say that the President committed suicide, he is shot and his body dynamited. In the same bloodbath, Amanda gives her life to protect Miguel. Soon it becomes clear that the military is forming its own destructive dictatorship instead of handing power over to the right as planned. Esteban Trueba realizes he has made a mistake and weeps for his country. All the while, Blanca has been hiding Pedro Tercero in a room of the house. She begs her father to save him. Esteban Trueba secures Pedro Tercero and Blanca's escape to Canada, and is finally reconciled with them both. One night, the police storm "the big house on the corner" and burn all the family's belongings. Then they kidnap Alba and take her to Esteban García, who rapes and tortures her almost to death. When Alba is on the brink of death in an isolation chamber called the "doghouse," Clara's spirit arrives and encourages her to live by writing in her mind. Alba pulls through by using her imagination. With the help of Transito Soto, Esteban García is able to save Alba and she returns to him at the house. In the epilogue, we discover that Alba has been narrating the story all along. She pieced it together from Esteban's memories and Clara's "notebooks that bore witness to life." As the novel ends, Alba stands on a new dawn for the Trueba family, pregnant with a daughter whom she will love and nurture in the tradition handed down to her from her great grandmother, Nívea del Valle.