Beloved begins in 1873 in Cincinnati, Ohio, where the protagonist Sethe, a formerly enslaved woman, has been living with her eighteen-year-old daughter Denver at 124 Bluestone Road. The book explores the lives of Sethe and her daughter after their escape from slavery, opening in 1873 after the Civil War. Their Cincinnati home has been haunted for years by an abusive revenant, whom they believe to be the ghost of Sethe's eldest daughter. Because of the haunting—which often involves objects being thrown around the room—Sethe's youngest daughter Denver is shy, friendless, and housebound. Sethe's sons, Howard and Buglar, ran away from home by the age of 13. Sethe believes they fled because of the malevolent ghost. Baby Suggs, the mother of Sethe's husband Halle, lived with the family but died in her bed soon after the boys fled, eight years before the start of the novel.
Paul D, one of the enslaved men from Sweet Home, the plantation where Sethe, Halle, Baby Suggs, and several others were once enslaved, arrives at Sethe's home. He tries to dismiss what he thinks are superstitions. He tries to help the family forget the bitter past and forces out the spirit. He seems successful at first: he persuades Denver to leave the house for the first time in years. But when they return home, Sethe, Denver, and Paul D encounter a young woman sitting in front of the house, calling herself Beloved. Paul D is suspicious and warns Sethe, but she is charmed by the young woman and ignores him.
Paul D begins to feel increasingly uncomfortable in Sethe's bedroom and begins sleeping in different places on the property, attempting to find a place that feels right. One night, while sleeping in the woodshed, Paul D is cornered by Beloved. While they have sex, his mind is filled with horrific memories from his past. Overwhelmed with guilt, Paul D tries to tell Sethe about it but cannot. Instead, he says that he wants her pregnant. Sethe is apprehensive but eager for the prospect of their relationship. Paul D resists Beloved and her influence over him. But when he tells friends at work about his plans to start a new family, they react fearfully. Stamp Paid reveals the reason for the community's rejection of Sethe.
When Paul D asks Sethe about it, she tells him what happened. After escaping from Sweet Home and joining her children at her mother-in-law's home, four horsemen came to the house at 124 Bluestone Road. Schoolteacher, one of his nephews, a slave catcher, and the sherif wanted to return her and her children to a life of slavery at the Sweet Home plantation in Kentucky. Sethe grabbed her children, ran to the woodshed, and tried to kill them all. She succeeded only in killing her eldest daughter, then two years old and "crawlin already." Sethe said that she was "trying to put [her] babies where they would be safe." Paul D leaves after this revelation.
Sethe comes to believe that Beloved is the daughter she had killed, as "BELOVED" was all she could afford to have engraved on her daughter's tombstone. Sethe begins to spend all of her time and money on Beloved, carelessly spoiling Beloved out of guilt, to the point that Sethe loses her job. Beloved becomes angry and more demanding, throwing tantrums when she does not get her way. Beloved's presence consumes Sethe's life to the point where she becomes depleted. She hardly eats, while Beloved grows bigger and bigger, eventually taking the form of a pregnant woman.
In the novel's climax, Denver reaches out to the Black community for help. Some of the local women come to the house to exorcise Beloved. At the same time, a white man, Mr. Bodwin, arrives at the house on a horse. When Baby Suggs arrived in Ohio after Halle bought her freedom from their owner, Mr. Bodwin had offered her the Cincinnati house as a place to stay in exchange for laundry and mending tasks. He has come for Denver, who asked him for a job. Denver had not told her mother, and not understanding why he was here, Sethe attacks the white man with an ice pick, thinking it was Schoolteacher trying to take her daughter. While Sethe is confused and has a "re-memory" of her master coming again, the village women take her over and Beloved disappears.
Denver becomes a working member of the community, and Paul D returns to a bed-ridden Sethe, who, depleted of life at Beloved's disappearance, remorsefully tells him that Beloved was her "best thing." He replies that Sethe is her own "best thing", leaving her questioning "Me? Me?"