The novel opens in June 1857 with the marriage of Lucy Graham and Sir Michael Audley. Lucy is a young, beautiful woman who enchants almost all who meet her. Sir Michael is a kindly, wealthy middle-aged widower. Lucy's past is unclear. Prior to marrying Sir Michael she had served as governess for the children of the local doctor, Mr. Dawson, and before that she was in service with Mrs. Vincent. Very little is known about her prior to that. Shortly after the marriage Sir Michael's nephew, the barrister Robert Audley, welcomes his old friend George Talboys back to England.
Three years before, though happily married, George's financial situation had been desperate. He left for Australia to seek a fortune in gold prospecting. Behind him in England he had left his young wife Helen, whom he is now anxious to get news of. He reads in the newspaper that she has died, and, after visiting her home to confirm this, he becomes despondent. Robert Audley cares for his friend, and, hoping to distract him, offers to take him to his wealthy uncle's country manor. George had a child, Georgey, who was left under the care of Lieutenant Maldon, George's father-in-law. Robert and George set off to visit Georgey, and George decides to make Robert little Georgey's guardian and trustee of £20,000 put into the boy's name. After settling the matter of the boy's guardianship, the two set off to visit Sir Michael.
While at the country manor Audley Court, Lady Audley avoids meeting George. When the two seek an audience with the new Lady Audley, she makes many excuses and avoids their visits. During her absence a thunder storm confines George and Robert to the interior of Audley Court, and the two are shown a portrait of Lady Audley. Looking back toward his friend, Robert notes that George seems disturbed, and attributes his disturbed mood to the storm. Shortly thereafter George disappears. Robert is perplexed. Unwilling to believe George simply left with no notice, Robert begins to look into the circumstances of his disappearance.
While searching for his friend, Robert takes note of the events surrounding George's disappearance. The name of Lady Audley repeatedly appears in these notes, and much to his distress, the evidence begins to collect against her. One night, he reveals his notes to Lady Audley, including that George was in possession of many letters of his former wife. Lady Audley sets off to London, where the letters were kept. Robert follows after her. However, by the time he arrives, he discovers that George's possessions have been broken into and the letters are missing. One possession, however, remains – a book with a note written by George's wife that matches Lady Audley's handwriting. This confirms Robert's suspicion that Lady Audley is implicated in George's disappearance; it also leads Robert to conclude that Lady Audley is actually George's supposedly dead wife.
Suspecting the worst of Lady Audley and being afraid for little Georgey's life, Robert travels to Lieutenant Maldon's house and demands possession of the boy. Once Robert has Georgey under his control, he places the boy in a school run by Mr. Marchmont. Afterwards, Robert visits George's father, Mr. Harcourt Talboys, and confronts the Squire with his son's death. Harcourt listens dispassionately to the story. In the course of his visit to the Talboys' manor, Robert is entranced by George's sister Clara, who looks startlingly like George. Clara's passion for finding her brother spurs Robert on.
Confession scene from a serialised magazine versionIn February 1859, Robert continues searching for evidence. He receives a notice that his uncle is ill, and he quickly returns to Audley Court. While there, Robert speaks with Mr. Dawson and receives a brief description of all that is known about Lucy's background. He hears that Lucy was employed by Mrs. Vincent at her school since 1852. To verify this claim, Robert tracks down Mrs. Vincent, who is in hiding because of debts. According to Miss Tonks, a teacher at Mrs. Vincent's school, Lucy actually arrived at the school in August 1854 and was secretive about her past. Miss Tonks gives Robert a travel box that used to belong to Lucy. Upon examining stickers on the box, Robert discovers both the name Lucy Graham and the name Helen Talboys.
Robert realizes that Helen Talboys faked her death before creating her new identity. When Robert confronts Lucy, she tells him that he has no proof. He leaves to find more evidence, heading to Castle Inn, which is run by Luke Marks. During the night, Lucy forces Luke's wife, Phoebe, to let her into the inn, then Lucy sets the place afire to kill Robert. However, Robert survives and returns to Audley Court and again confronts Lucy. This time, she says she is insane and confesses her life's story to Robert and Sir Michael, claiming that George abandoned her originally and she had no choice but to abandon her old life and child to find another, wealthier husband.
Sir Michael is unhappy and leaves with Alicia to travel through Europe. Robert invites a Dr. Mosgrave to make a more astute judgment regarding Lucy's sanity, and he proclaims that she is indeed victim to latent insanity, which overpowers her in times of stress and makes her very dangerous to any and all. Lucy, under the name of Madame Taylor, enters a mental institution located somewhere in Belgium along the route between Brussels and Paris. While being committed, Lucy confesses to Robert that she killed George by pushing him down a deserted well in the garden of Audley Court.
Robert grieves for his friend George until a dying Luke Marks contacts him. Before succumbing to injuries he suffered in the fire, Luke tells Robert that George survived Lady Audley's attempted murder. Luke then helped George escape, with George intending to return to Australia. Robert is overjoyed, and he asks Clara to marry him and go with him to Australia to find George. Clara accepts, but before they set out, George returns and reveals that he actually visited New York instead. The narrative ends with the death of Lucy abroad, and Clara and Robert happily married and living in a country cottage with George and his son. Robert's formerly infatuated cousin Alicia marries her once-spurned suitor, Sir Harry Towers, and Audley Court is left abandoned along with all of its unhappy memories.
