Every nine years, in the village of Wall in rural England, a market is held the other side of a stone wall dividing the realm of Faerie from our world. In the early Victorian era, young Dunstan Thorn meets Una, a fairy woman enslaved by the witch Semele, at the market. Dunstan purchases a glass snowdrop from her with a kiss and, later that night, makes love to her in the woods. Months later, Dunstan receives a baby in a basket—his and Una's son, Tristran.
Eighteen years later, Tristran is infatuated with someone named Victoria Forester. At the castle of Stormhold, in Faerie, the dying Lord of Stormhold throws his topaz pendant out the window and declares that the first of his three surviving sons—Primus, Tertius, and Septimus—to retrieve it will be his successor. The pendant flies upward and knocks a star out of the sky. While walking Victoria home one night, Tristan sees a falling star land in Faerie and vows to bring it to her. Victoria agrees to reward him with whatever he desires—including her hand in marriage—if he succeeds. Dunstan gives Tristran the snowdrop and enables him to pass the wall's guards by alluding to his fairy heritage.
Primus, Tertius and Septimus depart in search of the pendant after their father's death. Septimus poisons Tertius at an inn. Meanwhile, the Lilim, a trio of ancient witches, learn of the fallen star and plan to eat its heart to regain their youth. The eldest of the Lilim, the witch-queen, is chosen to find the star and consumes the remains of their last star's heart.
Tristran meets a small man who gives Tristran a silver chain, and a magic candle-stub which allows one to travel great distances quickly while it burns. Tristran uses the candle to reach the star, which turns out to be a young woman named Yvaine. Resolving to take her to Victoria anyway, Tristran tethers Yvaine to him with the chain; however, the candle burns out before he can return. Tristran and Yvaine travel on foot. Yvaine escapes on a unicorn when Tristran unchains her and leaves in search of food. Meanwhile, the witch-queen encounters Semele, who deceives her into disclosing what her mission is. The enraged witch-queen puts a curse on her, which prevents her from seeing, touching or perceiving the star.
After discovering that Yvaine is gone, Tristran catches a ride in Primus' carriage. The witch-queen conjures a wayside inn to catch Yvaine, who is drawing near. Yvaine arrives at the inn, followed by Tristran and Primus. The witch-queen attempts to poison Tristran but the unicorn warns him just in time. He rushes back to the inn as the witch-queen murders Primus. Tristran escapes with Yvaine by forming another candle from the remnants of the magic candle. Septimus later arrives and finds Primus' body. He sets off looking for the witch-queen, now obligated to avenge Primus. Tristran and Yvaine end up stranded on a cloud miles above Faerie when the candle burns out but are rescued by the crew of a flying ship. There, Tristran expresses that he no longer intends to force Yvaine to accompany him. However, by the custom of her kind, because he has saved her life, she is nonetheless obliged to do so.
Upon parting company with the ship, Tristran and Yvaine set off for Wall. They encounter Semele, who, because of the witch-queen's curse, cannot see Yvaine. Semele agrees to transport Tristran the rest of the way to Wall and Tristran obtains a promise from Semele that he will arrive there unharmed. This, however, does not prevent Semele using the snowdrop to transform him into a dormouse for the duration of the journey. Yvaine also rides in Semele's caravan, unbeknownst to the witch. Septimus, meanwhile, plots his attack on the witch-queen, who eventually kills him.
At the market, Tristran leaves Yvaine and crosses back into Wall to meet Victoria. Meanwhile, Yvaine realizes she has fallen in love with Tristran but learns that if she crosses the wall and leaves Faerie, she will be transformed into a piece of rock. A dismayed Victoria informs Tristran that she is already engaged to Robert Monday. She never believed he would go through with his quest, but is nonetheless willing to keep her promise and marry him. Tristran, not wishing to force Victoria into marrying him, reminds her that marriage was not the promise, but rather to give him anything he desired. He says that he desires that she marry her own love, Monday.
Tristran later returns to Yvaine at the market. She is delighted to learn that Victoria will be married to someone else, and that Tristran reciprocates her love. Meanwhile, Una is freed as her enslavement ends when the moon loses her child (Yvaine), if it happens in a week when two Mondays come together (the marriage of Victoria and Monday). Una seeks out Tristran and Yvaine and reveals herself as Tristran's mother and the late Lord of Stormhold's only daughter. As such, Tristran is the last male heir of Stormhold, and Yvaine presents him with the pendant, which she has been carrying. Yvaine is approached by the witch-queen, whose youth has run out and is now older than ever. Yvaine, no longer afraid, explains that her heart is no longer for the taking as she has given it to Tristran.
Una returns to Stormhold to rule in her son's stead, while Tristran and Yvaine travel throughout Faerie. Many years later, Tristran and Yvaine return to Stormhold, and Tristran assumes the lordship. When he grows old and dies, Yvaine continues to reign as the immortal ruler of Stormhold.
