The book is the story of Sethe and her youngest daughter Denver after their escape from slavery. Their home in Cincinnati is haunted by a 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, and her sons, Howard and Buglar, have run away from home by the age of 13. Baby Suggs, the mother of Sethe's husband Halle, dies in her bed soon afterwards.
Paul D, one of the slaves from Sweet Home—the plantation where Baby Suggs, Sethe, Halle, and several other slaves once worked—arrives at Sethe's home and tries to bring a sense of reality into the house. In attempting to make the family forget the past, he forces out the spirit. He seems successful at first; he even brings housebound Denver out of the house for the first time in years. But on the way back, they 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.
When made to sleep outside in a shed, 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, and instead says he wants her pregnant. Sethe is elated, and 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 reaching her waiting children at her mother-in-law's home, Sethe was found by her master, who attempted to reclaim her and her children. Sethe grabbed her children, ran into the tool shed, and tried to kill them all. She succeeded only in killing her eldest daughter, then two years old, by running a saw along her neck. Sethe claims that she was "trying to put my babies where they would be safe." The revelation is too much for Paul D and he leaves. Without him, sense of reality and time moving forward disappears.
Sethe comes to believe that Beloved is the two-year-old daughter she murdered, whose tombstone reads only "Beloved". Sethe begins to spend carelessly and spoil Beloved out of guilt. Beloved becomes angry and more demanding, throwing tantrums when she doesn't get her way. Beloved's presence consumes Sethe's life to the point where she becomes depleted and sacrifices her own need for eating, while Beloved grows bigger and bigger.
In the novel's climax, youngest daughter Denver reaches out and searches for help from the black community, and some of the village women arrive at the house to exorcise Beloved. At the same time, a white man comes into view, the same man that helped Halle's mother, Baby Suggs, by offering her the house as a place to stay after Halle bought her from their owner. He has come for Denver, who asked him for a job, but Denver has not shared this information with Sethe. Unaware of the situation, Sethe attacks the white man with an ice pick and is brought down by the village women. While Sethe is confused and has a "re-memory" of her master coming again, Beloved disappears. The novel resolves with Denver becoming a working member of the community and Paul D returning to Sethe and pledging his love.