What we know as the West Coast has fallen under Japanese control after the end of World War II. Germany, Japan, and Italy have won the war; America has been divided up into the Japanese-controlled Pacific States of America and the German-controlled eastern portion of the country, as well as a narrow, independent, but politically unimportant buffer between the two, known as the Rocky Mountain States.
Robert Childan owns an antiques shop that caters to elite Japanese customers, mainly the occupying class that values "American traditional ethnic art objects" (pg. 6). He despises the Japanese, particularly the demanding Mr. Tagomi, but he does have a sweet spot for a charming young couple, Paul and Betty Kasoura. Childan stresses about what sort of item he will find for Mr. Tagomi, who needs to impress an important business client.
Frank Frink has been fired from his job at a factory owned by Wyndam-Matson, which is a particularly big problem because Frank is secretly a Jew and cannot relocate to find another job. He decides to start a small jewelry making business with a coworker, Ed McCarthy, using some of the skills they learned at the factory – a factory that produces fake antiques that are sold at shop's like Childan's. Frank thinks of his wife Juliana and wonders whether he will ever see her again.
Juliana Frink is making a living as a judo instructor and begins a relationship with a truck driver, Joe Cinnadella, who claims to be an Italian veteran of the war. Juliana has a bit of unease about Joe, but agrees to go with him on an impromptu road trip to Denver, Colorado. On the way, she reads a book that Joe has brought with him: The Grasshopper Lies Heavy, which describes how the world would be if the Allies had won the war.
Tagomi meets Baynes, a man who claims to be a Swedish businessman. Tagomi has reason to think that Baynes might not be who he claims to be, and this suspicion is strengthened when Baynes says they must wait for the arrival of an elderly Japanese retiree to begin their meeting. The men wait several weeks before the man arrives.
In the interim, the Chancellor of Germany dies, opening up a power vacuum. Numerous Nazi officials, each seemingly more evil than the last, vie for power. Tagomi nearly has a breakdown when he realizes the enormous political power than these immoral men will wield.
Frank and Ed market their jewelry to Childan, who later gives a piece of it to Paul Kasoura. Paul says that this jewelry has great spiritual powers and suggests that they mass-produce them as good-luck talismans. Childan confronts Paul about this insult to America, and Paul apologizes.
Joe Cinnadella suddenly suggests that they take a detour to visit Hawthorne Abendsen, the author of The Grasshopper Lies Heavy. During their stay in a hotel, Juliana discovers that he is in fact a German operative sent to assassinate this controversial author; she kills Joe before escaping to warn Abendsen of the threat on his life.
Tagomi and Baynes finally meet with the elderly Japanese gentleman, who turns out to be retired General Tedeki. Baynes reveals that he is in fact a German spy, and explains that there is a German plan to launch a nuclear attack on the Japanese Home Islands. Nazi operatives from an opposing faction attempt to detain Baynes, but Tagomi courageously defends him with an antique pistol (perhaps a fake purchased from Childan and manufactured by Frank). Tagomi pays the price for his courage, however: wracked with guilt for taking life, he eventually has a heart attack. Baynes returns to Germany, to the safety of his organization - or so we think. Frank is arrested under suspicion of being a Jew, but is freed after Tagomi signs an order for his release shortly before the heart attack.
Juliana is shocked to discover that Abendsen no longer lives in The High Castle, his fortified mansion; instead, she finds him entertaining guests in an ordinary home. Abendsen no longer worries about being assassinated for his writing, and after a great deal of prompting from Juliana, confesses that he used the I Ching to write the book. After consulting the oracle itself, Juliana discovers that The Grasshopper Lies Heavy expresses "Inner Truth": Germany and Japan did in fact lose the war.