The story begins in the streets of Lahore. A Pakistani man, Changez, offers to direct an American visitor where he can find a good cup of tea. As they wait for their tea, Changez begins to weave a long story about his life, especially his time living in the United States – in between making remarks about the history, landmarks and society of Lahore, his native city which he loves and of which he is proud. The unnamed American is restless but remains to listen.
Changez tells the American he was an excellent student who, after completing his bachelor's degree in finance, joined Underwood Samson, a consultancy firm, as an analyst. After graduating from Princeton University, he vacationed in Greece with fellow Princetonians, where he met Erica, an aspiring writer. He was instantly smitten by her, but his feelings remained almost unrequited because she was still grieving over the death of her childhood sweetheart Christopher Zee, who succumbed to lung cancer. After a date, they return to his place and he proceeds to have sex with her, but stops because her emotional attachment to Chris prevents her from becoming aroused. After this incident there is an interlude where neither contacts each other. But soon they go on another date, after which they have sex when Changez convinces Erica to close her eyes and fantasize that she is with Chris. Though Changez is satisfied at this development in their relationship, this irreversibly damages their relationship. Soon she begins treatment in a mental institution. He notices she is physically emaciated and no longer her former self. After this meeting he travels to Chile on an assignment. When he returns to meet her, it is found that she has left the institution and her clothes were found near the Hudson River. Officially she is stated as a missing person, as her body has not been found. Christopher Zee has claimed another victim.
In his professional life, he impresses his peers and gets earmarked by his superiors for his work, especially Jim, the person who recruited him, develops a good rapport with him, and holds him in high esteem. This prompts the firm to send him to offshore assignments in the Philippines and Valparaíso, Chile. In Chile, he is very distracted due to developments in the world and, responding to the parabolic suggestion of the publisher his company is there to assess (which would lead to its breakup), he visits the nearby preserved home of the late left-wing poet Pablo Neruda and comes to see himself as a servant of the American empire that has constantly interfered with and manipulated his homeland. He returns from Chile to New York without completing the assignment and ends up losing his job.
Politically, Changez is surprised by his own reaction to the September 11 attacks. "Yes, despicable as it may sound, my initial reaction was to be remarkably pleased", he tells the American. He observes the air of suspicion towards Pakistanis. Changez, due to his privileged position in society, is not among those detained or otherwise abused, but he notices a change in his treatment in public. To express solidarity with his countrymen after his trip to Chile, he starts to grow a beard. After the 2001 Indian Parliament attack, India and Pakistan mobilize leading to a standoff. Noticing the US response to this situation, he has an epiphany that his country is being used as a pawn. With no job, an expiring visa and no reason to stay in the United States, he moves back to Lahore.
After returning to Lahore, he becomes a professor of finance at the local university. His experience and insight in world issues gains his admiration among students. As a result, he becomes a mentor to large groups of students on various issues. He and his students actively participate in demonstrations against policies that were detrimental to the sovereignty of Pakistan. Changez advocates nonviolence, but a relatively unknown student gets apprehended for an assassination attempt on an American representative, which brings the spotlight on Changez. In a widely televised interview, he strongly criticizes the militarism of U.S. foreign policy. This act makes people surrounding him think that someone might be sent to intimidate him or worse.
As they sit in the cafe, Changez keeps noting that the American stranger is very apprehensive of their surroundings, that he is in possession of a sophisticated satellite phone on which he is repeatedly messaging, and that under his clothing there is a bulge which might be a gun. Changez walks the stranger toward his hotel. As they walk, the American, now highly suspicious that he is in immediate danger, reaches into his pocket, possibly for a gun. Changez says he trusts it is simply his holder of business cards. But the novel ends without revealing what was in his pocket, leaving the reader to wonder if the stranger was a CIA agent, possibly there to kill Changez, or if Changez, in collusion with the waiter from the cafe, had planned all along to do harm to the American.
