The novel begins with Mr. Thomas Gradgrind sternly lecturing a room full of school children on the importance of facts. He believes that facts, and not imagination or emotion, are the key to a good education, and he educates all the children of the school and his own children, Louisa and Tom, according to this philosophy. When one of his worst students, Sissy Jupe, is abandoned by her father (a circus performer), Mr. Gradgrind takes in Sissy to educate her along with his children according to his sacred system of facts.
Since their hearts and imaginations have been utterly neglected, Louisa and Tom grow into deformed human beings—inwardly, not outwardly. They know neither how to love nor how to be happy, and sense that there is something very wrong with the way they are living their lives. At Mr. Gradgrind's request, Louisa dutifully marries his older friend, Mr. Josiah Bounderby, who is a blustering manufacturer in Coketown. She agrees to marry Bounderby not because she loves him, but because she thinks it will help her brother Tom, who is apprenticed to Mr. Bounderby. Tom is the only person she cares for and, knowing this, Tom wheedles her into the marriage. Now both Louisa and Tom live with Mr. Bounderby, and Sissy stays back with Mr. and Mrs. Gradgrind and Jane, the youngest Gradgrind.
Mr. Bounderby's factory workers, also called "Hands," do not live happy lives under his rule. One factory worker by the name of Stephen Blackpool is daily worn out by his work at the factory, but what plagues him more is his unhappy marriage, for his wife has become a hideous drunk. He wishes to free himself from her and marry Rachael, a sweet, gentle woman in the village, but he cannot because of the ties of marriage. After he asks Bounderby for help on the matter, Mr. Bounderby informs him that he might be able to get out of the marriage if he had enough money to pay for a lawyer, but as he doesn't the cause is hopeless. As he resignedly leaves Mr. Bounderby's home, he runs into an old woman, who for some reason is very interested to hear any news about Mr. Bounderby and his successes.
Tom is now a dissolute, lazy young man, very much in debt and inclined to a sulky attitude in front of everyone. His, Louisa's, and Mr. Bounderby's lives are somewhat enlivened by the arrival of a Mr. James Harthouse from London. Mr. Harthouse is a wealthy, pleasing young gentleman who is bored out of his mind and has come to work for Mr. Bounderby in hope of finding something entertaining. He quickly becomes very interested in Louisa, for he sees that a strong fire burns under the cold, impassive mask of a face she wears. Noticing that she softens and shows emotion only towards Tom, Harthouse sets about seducing her by pretending to be Tom's good friend. Mrs. Sparsit, an old widow who used to live with Mr. Bounderby before he married Louisa and was then unceremoniously kicked out, watches the progression of his seduction of Louisa with glee.
Mr. Bounderby's factory workers, restless with their bad lot and stirred on by the fiery words of a sleazy union orator named Slackbridge, decide to form a union. Stephen, present at the rowdy meeting at which they come to this decision, tells them that he cannot join because of a promise he has made to someone. The entire town then decides to shun him as a result of his decision. Bounderby brings Stephen in for questioning, but fires him when he won't reveal anything about the union. Louisa and Tom visit Stephen to give him some money before he leaves town in search of a new job, and before they leave, Tom secretly tells Stephen to hang around the bank the few nights before he leaves town…there might be something good in it for Stephen. Stephen does so, but nothing happens. Soon after that, the bank is robbed, and as a result of his suspicious activity, Stephen is the main suspect.
By a coincidence of events, Louisa is left alone at home one night while her husband is out of town, and Harthouse finds her, passionately declares his love for her, and begs her to elope with him. Louisa tells him that she will meet him somewhere later that night. Mrs. Sparsit, hiding in the vegetation near to where those two are standing, hears all this with a vengeful delight and follows Louisa when she leaves the house, but then loses her track. She hastily runs to tell Mr. Bounderby that his wife has all but eloped with Mr. Harthouse.
Louisa, in the meantime, has actually gone to her father's house and is at her wits' end. She confronts her father and tells him that the unhappiness of her entire life which has brought her to this point is all due to his education of facts, which quashed all feelings of the heart which are so essential to human existence. Dumbstruck and penitent, her father tries to catch her as she falls in a faint on the floor.
Thanks to Sissy's care and actions (Sissy persuades Mr. Harthouse to leave Coketown forever), Louisa gradually begins to recover at her father's house. Bounderby, who learned of the almost-elopement through Mrs. Sparsit, tells Mr. Gradgrind that if Louisa stays at her old home, he and she shall cease to live together as man and wife—and so they separate.
Meanwhile, tragedy has befallen Stephen. On his way back to Coketown to clear his name, he falls into Old Hell Shaft, a huge pit in the ground. Sissy and Rachael find him there, and the men of the surrounding village manage to rescue him, but he dies shortly after being retrieved from the pit, holding Rachael's hand and peacefully gazing at the stars. Before he dies, he asks Mr. Gradgrind to clear his good name, because it was Tom, who committed the robbery.
Sissy saves the day again: she tells Tom to hide with her father's old circus company, and from there Mr. Gradgrind and Louisa plan for him to slip out of the country. One of Mr. Gradgrind's old pupils, Bitzer, who has been brainwashed by his education of facts, almost prevents Tom's escape, but thanks to the cunning of the circusmaster, Tom manages to evade Bitzer's clutches and escapes to another country.
Back in Coketown, Mrs. Sparsit has accidentally revealed Mr. Bounderby to be a fraud. Everyone had thought Mr. Bounderby to be a self-made man, deserted by cruel parents at a young age… until Mrs. Sparsit dragged his very respectable and kind mother to the public eye, thinking her to be an aid to Stephen Blackpool in the Bank robbery. Mr. Bounderby, now shunned as a liar, "exiles" Mrs. Sparsit from his presence and she is forced to spend the rest of her days with an old, sick, miserly relation.
Mr. Gradgrind, having learned his lesson the hard way, devotes the rest of his life to faith, hope, and charity instead of facts. Louisa does not remarry, but finds some happiness in helping Sissy care for her own children. Tom dies far from home, and repents of his hardness towards his family on his deathbed.