The play contains a prologue in which the character Machiavel, a Senecan ghost based on Niccolò Machiavelli, introduces "the tragedy of a Jew." Machiavel expresses the cynical view that power is amoral, saying "I count religion but a childish toy,/And hold there is no sin but ignorance."
The Jewish merchant in question, Barabas, is introduced as a man owning more wealth than all of Malta. When Turkish ships arrive to demand tribute, however, Barabas's wealth is seized and he is left penniless. Incensed, he begins a campaign to engineer the downfall of the Maltese governor who robbed him. With the aid of his daughter, Abigail, he recovers some of his former assets and buys a Turkish slave, Ithamore, who appears to hate Christians as much as Barabas does. Barabas then, in revenge for the robbery, uses his daughter's beauty to embitter the governor's son (Lodowick) and his friend (Mathias) against each other, leading to a duel in which they both die. When Abigail learns of Barabas's role in the plot, she consigns herself to a nunnery, only to be poisoned (along with all of the nuns) by Barabas and Ithamore for becoming a Christian. The two go on to kill a couple of friars who threaten to divulge their previous crimes. Ithamore himself, however, is lured into disclosing his secrets and blackmailing Barabas by a beautiful prostitute and her criminal friend. Barabas poisons all of them in revenge, but not before the governor is apprised of his deeds. Barabas escapes execution by feigning death, and then helps an advancing Turkish army to sack Malta, for which he is awarded governorship of the city.
He then turns on the Turks, allowing the Knights of Malta to kill the Turkish army. The Maltese, however, turn on Barabas and kill him as they regain control of Malta.