It is the summer of 1945. Amidst the ruins of a Caucasian village which has been decimated by the Second World War, the members of two Collective Farms meet with a delegation sent from the State Reconstruction Commission. The Collective Goat Farm Rosa Luxemburg, forced to vacate their lush valley when Hitler’s armies approached, now want their land back. Meanwhile, the Collective Fruit Farm Galinsk wants the valley assigned to them. Members from each farm present their case to the delegation, and finally a member of the Fruit Farm Galinsk announces plans for an enormous project to irrigate the valley, grow more fruit, and plant vineyards. She shows her blueprints to the delegation, who marvel at the ambitious plans. Even the Rosa Luxemburg farmers agree that the valley should go to the fruit farmers, as they will put the land to better use. The delegation, along with the members of both farms, decide to spend the night celebrating this triumph of reason with a performance from the renowned singer Arkadi Tscheidse. Arkadi arrives and announces that he will perform an updated version of a very old Chinese legend called The Chalk Circle.
The play-within-a-play begins as Arkadi tells of a wealthy governor, Georgi Abashwili, who rules a city in Grunisia with his beautiful, vain wife Natella and pampered infant son Michael at his side. Though his country is at war, the Governor allows himself and his family many indulgences, such as a pair of permanently on-call doctors to attend to Michael and plans for a large expansion of the Governor’s Palace. One Easter Sunday, Arsen Kazbeki—known as the Fat Prince—stages a coup, overthrowing the reviled Grand Duke and all his Governors. When Georgi is taken prisoner, his servants prepare the palace for a siege while his wife, Natella, is hurried away to safety. Natella has packed extravagantly for her flight from the city, and while she orders her servants to bring her even more clothes and finery from her bedchamber, the servant tasked with watching Michael sets the baby down on the ground in order to fetch Natella her things. Meanwhile, a servant-girl named Grusha and a soldier named Simon Shashava declare their love for one another amidst the chaos of the coup. As a red sky rises over the city, Simon gives Grusha a silver cross on a chain as a token of their engagement, and Natella flees, forced to leave her belongings behind. In the madness, however, Michael is left behind too. Grusha picks him up, and even though her fellow servants tell her to abandon the child—reminding her that the Fat Prince’s Ironshirts will certainly be looking for him—Grusha carries him away from the palace toward safety.
Grusha bonds with Michael as the two of them make their way into the mountains. Grusha has very little money, and begs at the cottages she comes across for milk and shelter. At the home of a peasant woman and her husband, Grusha feels she can carry the child no farther, and abandons him on their doorstep. Grusha leaves, but soon runs into two Ironshirts and their Corporal, who ask her if she has heard of or seen a missing baby “from a good family,” who is sure to be dressed in fine linens. Grusha, realizing that the men intend to harm Michael, panics and returns to the home of the peasant woman, whom she begs to remove the baby’s fine linen swaddling and claim that he is her own child. When the Ironshirts arrive to ask Grusha why she ran away, the Corporal notices the child wrapped in fine linen, and the peasant woman panics and confesses that the child is not hers. As the Corporal makes to lift the child from his crib, Grusha knocks the Corporal over the head with a log. She once again takes Michael and runs. When Grusha arrives at a glacier which leads to the mountain villages, she finds that the bridge which allows passage over a deep ravine is in poor shape. Although the merchants gathered at the bridge warn Grusha that passage is dangerous, she hears the Ironshirts approaching, and runs across anyway. The Ironshirts arrive, but know they cannot cross the rotten bridge. Grusha takes Michael further into the mountains.
Grusha travels for seven days through the frigid mountains on the way to her brother’s house. As she goes, she anticipates the warm welcome she will receive from her brother and his wife, and the delicious food that she and Michael will be served. When she arrives, though, she is desperate and weak, and her brother Lavrenti and his deeply religious wife Aniko question what Grusha is doing alone with a child. Though Aniko is skeptical of Grusha’s presence in the house, Lavrenti allows her and Michael to stay. After six months, however, the snow has begun to melt, and Lavrenti tells Grusha that it is time for her and Michael to leave. Lavrenti has arranged for Grusha to marry the son of a local peasant woman. Grusha protests, as she is betrothed to Simon Shashava, but Lavrenti insists that this man will be her husband only on paper—he is sick, and very near death, and once he dies Grusha will inherit his land and his home. Grusha agrees to go along with her brother’s plan. When she arrives at the home of her new husband-to-be, her new mother-in-law hurries the ceremony along, having hired a local monk to ensure that the marriage is made official as soon as possible, since her son is taking his last breaths. As more and more neighbors show up to observe the strange scene, some begin to gossip about the political unrest in Grusinia, saying that the Grand Duke has returned to power and all the soldiers will soon be coming home from war. Grusha, distressed, realizes—just as she has wed herself to another man—that this means Simon will soon be back. Just then, Grusha’s new husband, Jussup, sits up from his deathbed, suddenly alive and alert.
As months go by, Grusha must deal with her new husband’s distaste for her and for Michael, as well as his increasingly harsh demands. He taunts Grusha daily, and tells her that her beloved Simon will never come for her. As time passes, Michael grows older, and Simon fades from Grusha’s memory. One day, Grusha washes linens in a nearby stream while Michael plays with some of his friends from the village. Simon arrives at the river, and Grusha is overjoyed—though she breaks the sad news that she can never return to Nuka, as she has assaulted an Ironshirt and married another man. Simon, noticing a child’s hat in the grass, asks if Grusha has a child. She replies that she does, but insists it is not hers. Simon tells Grusha to throw the cross he gave her into the stream, and leaves. Nearby, the children shout that a pair of Ironshirts have seized Michael, suspecting that he is the son and heir of the late Governor of Nuka. Grusha follows the soldiers back to the city, knowing she will face trial.
The singer Arkadi backtracks to tell the story of Azdak, the judge who will preside over Grusha’s case for custody of Michael. Years ago, after sheltering an old man he believed to be a beggar, Azdak realized the old man was actually the recently-deposed Grand Duke. Filled with shame for having sheltered such a corrupt and reviled political figure, Azdak branded himself a traitor and turned himself in to the authorities in Nuka to be judged. When he got there, he found that, in the coup, all the judges had been hanged. The Ironshirts, thinking Azdak a just man, appointed him the new judge in Nuka. Since then, Azdak has made a name for himself as a nontraditional judge who often hears two or more cases at once, and delivers unlikely but nevertheless just verdicts. He becomes known throughout the land as “the poor man’s magistrate.” When the Grand Duke returns, however, and the Fat Prince is executed, Azdak fears that his unconventional methods and years of surprising decisions will come back to bite him. Instead, when Natella returns to Nuka to reclaim her husband’s estates, she approaches Azdak to take on the case, and he willingly obliges.
In court in Nuka, Grusha reunites with her servant friends amidst continuing chaos and revolt. One of the palace cooks tells Grusha that she is lucky Azdak is hearing her case, explaining that Azdak is not a “real” judge, since he stands up for the poor. Simon appears, and offers to swear in court that he is the father of Grusha’s child. Grusha nearly bumps into the Corporal she assaulted back at the foot of the mountains, but he does not recognize her. Natella arrives at court, flanked by lawyers and speaking openly of her hatred for the common people. Azdak finally takes his seat as the presiding judge and, after hearing Natella’s testimony and accepting a bribe from her lawyers, implores Grusha to explain why the child should be given to her. Grusha replies simply that the child is hers, saying that she brought him up, clothed him, fed him, and taught him how to be friendly and hardworking. Natella’s lawyers then bring up the issue of Michael’s status as the Governor’s heir, arguing that it’s in Michael’s best interest to inherit the Governor’s estates.
Grusha, Simon, and the cook attempt to argue Grusha’s case, but Azdak holds them all in contempt and fines them. Grusha accuses Azdak of being a hypocrite and a sycophant, and calls him a “drunken onion” and a “bribetaker.” Azdak adjourns the case for fifteen minutes. He pulls Grusha aside to ask why she wouldn’t want her son to grow up in the lap of luxury. Grusha does not answer, but Arkadi sings what she is thinking: if Michael grows up wealthy, he will grow up to be cruel. Michael is brought into the courtroom, and Azdak announces that he has devised a test which will allow him to determine the child’s true mother. He draws a circle on the ground, places Michael in the middle of it, and instructs Grusha and Natella to each grab one of Michael’s hands and pull. Whoever can yank the child from the circle is his true mother. When Azdak instructs the women to pull, Natella easily yanks Michael onto her side—Grusha does not pull at all. Grusha begs Azdak to allow her to keep the child just a little while longer, and Azdak orders the women to complete the test again. Again, Natella yanks Michael roughly from the circle, while Grusha cries that she cannot harm the child she has brought up from infancy. Thus, Azdak declares Grusha to be Michael’s true mother, and advises her to take him and leave the city. Moreover, he declares that the Governor’s estates will fall to the city, and will be converted into a playground for children. Natella faints, and is carried away by her lawyers. Azdak then removes his judge’s robes and invites all present to join him outside for dancing and drinking. As his final act, he divorces Grusha from Jussup, allowing her and Simon the freedom to be together at last. As Michael, Simon, and Grusha dance, Azdak stands alone, “lost in thought.” Arkadi sings his story’s lesson, which mirrors the lesson of the peasant farmers in the prologue: “That what there is shall go to those who are good for it.”