The novel begins with Silas Lapham, a middle-aged native of rural New England, being interviewed for a newspaper story about his rise to wealth in the mineral paint business. Despite his limited education, Lapham is a shrewd and hardworking man, an American success story. But he, his wife, and two daughters feel socially awkward compared to other wealthy Bostonians. They decide to build a new home in the fashionable Back Bay neighborhood, and Lapham spares no expense in making it impressive.
Tom Corey, a young man from an "old money" Boston family, shows an interest in the Lapham girls, and Mr. and Mrs. Lapham assume he is attracted to Irene, their beautiful younger daughter. Tom joins the Lapham paint business in an attempt to find his place in the world, rather than rely on his wealthy father. Tom introduces Lapham to the cream of Boston society at a dinner party, and they remain on good terms even though the occasion turns out to be embarrassingly awkward.
As Tom continues calling on the Laphams regularly, it's assumed that he wants to marry Irene, and she hopes for just such a result. Tom, however, later shocks both families by revealing that he loves Penelope, the older, less glamorous but more intelligent and thoughtful sister. Though Penelope has feelings for Tom, she is held back by the romantic conventions of the era, not wanting to act on her love for fear of betraying her sister.
Meanwhile, Lapham and his wife Persis sometimes clash over his treatment of people from their less prosperous past. For instance, Lapham is generous to the widow and daughter of his fallen Civil War comrade Jim Millon, feeling that he owes the man his life. He quietly sends money to Millon's widow and gives the daughter a job. When Persis Lapham objects that she thinks the two women are taking advantage of her husband's generosity to the possible detriment of his reputation, Lapham insists he is paying a debt of honor. Persis also faults her husband for distancing himself from his former business partner Milton K. Rogers, who has come down in the world since their association ended, but Lapham insists he has treated Rogers fairly.
Amid the uproar over the Corey courtship, however, Rogers reappears, asking for money for a series of schemes. Persis convinces her husband to provide the help. Unfortunately, Rogers proves to be a very poor businessman, causing the Laphams' to lose considerable sums. On top of that, Lapham's major asset, his new home on Beacon Street, burns down before its completion due to his own carelessness. However, Lapham turns down the opportunity to salvage his fortunes by participating in a dishonest scheme contrived by Rogers and unscrupulous English investors. Likewise, when a purchaser offers to buy Lapham's paint business, Lapham discloses that the business will fail due to a new competitor, and the purchaser abandons the sale.
The Laphams are thus forced to move back to their modest former residence, where the mineral paint was first developed, and, ultimately, the competitor buys the business, with Lapham reduced to the status of employee. The Laphams, though not destitute, are now no longer wealthy. Tom and Penelope are finally able to marry after Irene accepts their romance. The elder Laphams, living in the countryside, are left to reflect on their extraordinary rise and decline.
