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. Corey joins the Lapham paint business in an attempt to find his place in the world, rather than rely on his wealthy father. When Tom begins 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 Lapham 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, Silas Lapham's former business partner Milton K. Rogers has reappeared in his life, asking for money for a series of schemes. Mrs. Lapham, who feels that her husband treated Rogers shabbily during their previous partnership, urges him to provide the help. Lapham's new dealings with Rogers, however, result in substantial financial losses. Lapham's major asset, the new home on Beacon Street, burns down before its completion due to his own carelessness.
Mr. and Mrs. Lapham are forced to move to their humble rural home, where the mineral paint was first developed, and while they are not destitute, they are no longer wealthy. Tom and Penelope are finally able to marry after Irene accepts their romance. The elder Laphams, living in the countryside by themselves, are left to reflect on their extraordinary rise and decline.