The grand, historic Audley Court has fallen into disrepair. The stately Essex mansion, which contains secret passageways and a secluded grove, is home to Sir Michael Audley, a kind, wealthy old bachelor, and his will-full, eighteen-year-old daughter, Alicia.
Lucy Graham comes to the village near Audley Court to work as a governess for Mrs. Dawson. No one knows much about her past, but everyone in the neighborhood enjoys her charming company and beautiful appearance. Sir Michael soon falls in love with Lucy and begins to court her, assuming that, if she returns his feelings, it will because of the purity of his love rather than his wealth and fortune. When he proposes to Lucy, he requests she disregard all financial considerations and think only of her feelings for him as a man. She says she cannot do so, because she will always be influenced by her impoverished upbringing. The couple agrees to marry anyway. Alice resents her new, young stepmother.
George Talboys returns to England after spending three and a half years abroad seeking his fortune in Australia. He wishes to reunite with his son and wife, whom he abandoned because he couldn’t provide for them. Meanwhile, back at Audley Court, Phoebe Marks, the plain maidservant of Lady Audley, discusses the decadence of her lady with Luke Marks, Phoebe’s cousin and fiancé. The couple snoops around Lady Audley’s chambers and discovers a baby’s shoe and lock of hair. Phoebe begins to form a blackmail scheme to get Luke money to start a public house.
Robert Audley is the lazy, indifferent nephew of Sir Michael. Though he is a barrister, Robert takes little interest in his profession. Upon running into George, an old friend from his school days, the latter tells Robert about his search for his wife, Helen. The two find a newspaper containing the announcement of her recent death. George is distraught, and the two men go to visit George’s father-in-law, Lieutenant Maldon, who confirms that George’s wife is indeed dead. Upon leaving, George makes Robert the legal guardian of his son, Little Georgey, who is staying with Maldon.
A year later, George still feels intense sorry for his wife. He and Robert go to visit Audley Court, but Lady Audley keeps coming up with excuses not to meet them. Eventally, Robert and George visit while Lady Audley and Sir Michael are away, responding to a telegram Lady Audley received from her dying former employer, Mrs. Vincent. In their absence, Alicia shows George and Robert a secret passageway into Lady Audley’s private quarters, where they view a portrait of the lady. Afterwards, George seems agitated, but Robert assumes he’s simply afraid of the raging storm outside. The next day, George disappears without a word to Robert. Robert goes to Audley Court and discovers that George had briefly been there but has not been seen since. Robert begins to worry for his friend.
Robert goes to Lieutenant Maldon to ask if he has seen George. Maldon says that George visited the night before but then left for Australia. Robert finds a half-burned telegram in the fire place, which appears to repeat the exact same information Maldon just told Robert. Upon traveling to Liverpool, however, Robert cannot find George’s name on any of the recent ships’ passenger lists. Growing suspicious, he begins to keep a list of all the mysterious facts surrounding George’s disappearance, fearing that George never left England and may be dead.
Meanwhile, back at Audley Court, Lady Audley offers Phoebe and Luke Marks money so that they may get married and start a public house. Luke tells Lady Audley that she will give them much more, implying that he is now blackmailing her. He and Phoebe use their new money to buy an ugly, drafty building named the Castle Inn.
Hunting season arrives, and with it a group of bachelors, including Robert, come to Audley Court. Robert does not care for hunting and stays inside, chatting with Lady Audley about his suspicions concerning George’s disappearance. Another bachelor, Sir Towers, proposes to Alicia, but she rejects him because she loves Robert. Lady Audley tells Sir Michael that Robert must leave their home because he pays an inappropriate amount of attention to his young aunt. Robert then takes a room at the Castle Inn, where Lady Audley comes to visit him and ask about his investigation into George’s disappearance. Robert mentions that he wishes to study George’s old letters. Soon after, Robert discovers later Lady Audley has left for London.
Robert returns to his home in London only to find all of George’s letters, including those written to him by Helen, missing. Robert finds a few books that George left behind, one containing Helen’s handwriting. When he sees the handwriting, he comes to horrible realization he doesn’t utter. Robert visits Maldon and confronts him about the burnt telegram. Maldon weeps, looking so pitiful Robert doesn’t question him further. Robert removes George’s son from the home and places him in a boarding school.
Robert feels heavy-hearted about the dark matters he’s investigating and makes a deal; he will only continue the investigation with the blessing of Mr. Harcourt Talboys, George’s estranged father. Harcourt has an unwavering, unforgiving view of justice and disowned his son for marrying beneath the family’s station. Robert fails to convince Harcourt to care about his son’s disappearance and leaves the Talboys’ mansion relieved his investigation is over.
As he leaves, Robert is confronted by Clara, George’s sister. Clara begs Robert to avenge her brother’s death. Her passion enhances her physical beauty, convincing Robert to continue his investigation. Soon after, Robert receives a letter for Alicia saying Sir Michael is sick and would like to see him. Upon returning to Audley Court, Robert questions Dr. Dawson about the history of Lady Audley, his former employee. Dawson says he knows nothing about her except that she came recommended by Mrs. Vincent.
Robert tracks down Mrs. Vincent, who tells him she knows little of Lucy Graham’s backstory. She also says she was not, in fact, deathly ill previous year, nor did she send a telegram calling for Lucy. Her other employee, meanwhile, Miss Tonks is able to provide the exact date that Lucy came to their school. Miss Tonks also gives Robert access to Lucy’s trunk, on which Robert finds one label, bearing the name of Lucy Graham, pasted upon another. He peels back the top label and with these clues, becomes convinced that George’s wife and Sir Michael’s wife are, in fact, the same person. Troubled by this revelation, Robert visits the town Helen Talboys grew up in. There, he meets the Maldons’ landlady, Mrs. Barkamb, who gives him letters Helen had written to her father. In these letters, Helen explains that she must abandon her old life and speaks of a “secret” motivation her father knows about.
Before returning to Audley Court Robert stops at a nearby church, where he runs into Clara. He tells her he thinks he knows who killed George but that he doesn’t want to give her a name before he’s absolutely certain. Robert then meets with Lady Audley and tells her all the evidence he has collected, without explicitly accusing her of murder. He says the woman who murdered George should flee the country, so that he will not have to reveal the awful truth. In response Lady Audley calls him mad and says she won’t allow him to accuse her. Robert leaves and Lady Audley tries to convince Alicia and Sir Michael that Robert has gone mad.
That night, Lady Audley sits alone contemplating her appearance. She considers how she realized at a young age that she could use her beauty to get what she wanted. She contemplates Robert’s accusations, and decides only death will stop him. Just then Phoebe Marks arrives to inform her that Robert is staying at the Castle Inn, and that unless Lady Audley pays the Marks’ rent, Luke will tell Robert her secrets. Phoebe admits she wishes Luke would leave the public house, as he gets so drunk and careless she fears they are at risk of being burnt in their beds. Phoebe hands Lady Audley a letter from Robert stating that if Helen Talboys is alive, Robert will bring Mrs. Barkamb to identify her.
Lady Audley tells Phoebe to take her to the Castle Inn so that she can pay the landlord herself. When they arrive, Lady Audley says she feels faint and goes inside to get some water. While in there, Lady Audley double-locks Robert’s room and then purposely sets a lit candle very close to some curtains. As the two women walk away from the inn, Phoebe sees the flames and accuses Lady Audley of starting the fire.
The next morning, Lady Audley chats casually with Sir Michael and Alicia and then says she feels sick and needs to lie down. After a deep sleep, she invites Alicia to go for a walk with her on the mansion’s grounds. They run into Robert, who reveals that he did not sleep in his room in the inn the previous night and, being a light sleeper, woke up before the fire could engulf him. No one died in the fire, although Luke was severely injured. Having learned from the Markses that Lady Audley set the fire, Robert will no longer be merciful to her and will expose all her secrets.
Lady Audley tells Robert to go get Sir Michael because she’s going to confess. She declares she’s mad and that she killed George because he pushed her towards insanity. When Sir Michael comes in she confesses her life story, beginning with her discovery that her own mother was institutionalized for madness. She describes her marriage to George and how living in utter poverty drove her to madness. She then describes abandoning her child and her old life, marrying Sir Michael for status and wealth, and faking her own death using the body of the daughter of her father’s housekeeper, Mrs. Plowson. Her confession devastates Sir Michael. Robert convinces Alicia to leave with Sir Michael, and then sends for a physician.
Dr. Musgrave arrives and determines that, while Lady Audley is not mad, she suffers from mania in times of stress and, as such, is dangerous. He gives Robert a letter that will admit Lady Audley to an asylum in Belgium under a false name. Before leaving, she becomes angry and tells him how she pushed George to his death in an old well on the grounds of Audley Court. Distraught at George’s horrible fate, Robert returns to Essex to see Luke. Before dying from his burns, Luke tells Robert he found George alive right after Lady Audley’s murder attempt. He took George to his house and healed him. George then left, saying he was going to sail to Australia. Robert asks Clara to marry him and go looking for George in Australia together. She accepts, but before they can leave, George returns to London. He was in New York, but returned because he missed his dear friend Robert.
Two years later, Robert has developed a successful career as a barrister. He lives with his wife Clara, their infant son, and George Talboys. Little Georgey often comes from school to visit them. Alicia has finally accepted Sir Towers’ proposal, Sir Michael has moved, and Audley Court is empty. Lady Audley died of illness in the Belgium asylum. Thus, the story ends with everyone at peace.