Eustace Scrubb, now a reformed character following the events of The Voyage of the Dawn Treader, encounters his classmate and new friend Jill Pole at their school, Experiment House, where they are miserable. Jill has been tormented by bullies and is hiding from them. Eustace tells Jill about his Narnian adventures, and how his experiences there led to the changes in his behaviour. Eustace suggests asking for Aslan's help, and as the bullies converge on them, the two blunder through a gate that leads them to Aslan's Country.
They encounter a cliff, where Jill shows off by approaching the edge, and Eustace, trying to pull her back, falls over the edge. Aslan appears and saves Eustace by blowing him to Narnia. He charges Jill with helping Eustace find King Caspian X's son, Prince Rilian of Narnia, who disappeared some years before. He gives Jill four Signs to guide them on their quest and then blows Jill into Narnia, where Eustace is already waiting by a great castle. They watch as an elderly and frail man takes ship and sails from the harbour. To Eustace's dismay, they learn that the departing King is actually King Caspian; by failing to greet him they have missed the first Sign. Trumpkin the Dwarf, now Lord Regent and very elderly and deaf, provides Jill and Eustace with rooms in Cair Paravel, but on the advice of Glimfeather the Owl they make no mention of their quest. Glimfeather summons them to a Parliament of his fellow talking owls, who explain that Prince Rilian disappeared a decade earlier while searching for the green serpent that killed his mother.
Jill and Eustace are flown to the marshes on the northern edge of Narnia where they meet their guide, Puddleglum, a gloomy but stalwart Marsh-wiggle. They journey toward the giant-lands north of Narnia. Hungry and suffering from exposure, they meet the Lady of the Green Kirtle accompanied by a silent knight in black armour. She encourages them to proceed northward to Harfang, the castle of the "Gentle Giants", who she says would be glad to have them at their Autumn Feast. Jill and Eustace, overcome at the thought of comfort and warmth, are eager to go; only Puddleglum argues against the journey to Harfang. After several days' journey, and braving a mysterious chasm in a driving snowstorm, they are welcomed at Harfang.
From the castle the three see that in the snowstorm they had blundered through the ruins of a giant city in the valley below, thereby missing Aslan's second Sign. They also see the words "Under Me" engraved on the road, which is the third Sign. Discovering from a cookbook in the kitchen that they are the main course for the Autumn Feast, they make a narrow escape from Harfang. Following the Sign, they take shelter in a cave under the ruined city, where they fall down a long dark slope into Underland.
They are found by an army of underground-dwelling earthmen, who take them aboard a boat across the subterranean Sunless Sea to the city ruled by the Lady of the Green Kirtle. She herself is away, but her protégé, a young man, greets the travellers pleasantly. He explains that he suffers from nightly psychotic episodes, and during these episodes he must, by the Lady's orders, be bound to a silver chair; for if he is released, he will turn into a deadly green serpent and kill everyone in sight. The three travellers determine to witness the youth in his torment, as they sense it could be the key to their quest.
When the young man is tied to his chair, his "ravings" seem instead to indicate desperation to escape an enchanted captivity. After several threats, the youth finally begs the three to release him in the name of Aslan. Recognizing this as the fourth Sign, they hesitantly do so. The young man immediately destroys the silver chair. Free from enchantment, he thanks them and declares that he is the vanished Prince Rilian, kept underground by the Lady of the Green Kirtle as part of her plot to conquer Narnia.
The Green Lady returns and tries to bewitch them all into forgetting who they are, but the barefoot Puddleglum stamps out the enchantress's magical fire and breaks her spell. The enraged Lady transforms herself into a green serpent, and Rilian kills her with the help of Eustace and Puddleglum. Realising that the Green Lady was herself the serpent who killed his mother, Rilian leads the travellers to escape from Underland. The gnomes, who had also been magically enslaved by the Lady, are now freed by her death and joyfully return to their home even deeper in the earth, a land called Bism. One of them shows Rilian's party a route to the surface, and Rilian returns to Cair Paravel as King Caspian is returning home. Caspian is reunited with his long-lost son but dies moments later. Rilian is then declared King of Narnia.
Aslan appears and congratulates Eustace and Jill on achieving their goal, then returns them to the stream in his country where Jill first met him. The body of King Caspian appears in the stream, and Aslan instructs Eustace to drive a thorn into the lion's paw. Eustace obeys, and Aslan's blood flows over the dead King, who is revived and returned to youth. Aslan allows Caspian to accompany Eustace and Jill back to their own world for a brief time, where they drive off the bullies before Caspian returns to Aslan's Country. Experiment House becomes a well-managed school, and Eustace and Jill remain good friends.