The novel begins in India, with a Prologue written by an anonymous member of the Verinder family, a cousin and fellow soldier to the Colonel John Herncastle. The anonymous narrator begins by tracing the Moonstone’s history, which begins in the ancient temple of Somnauth, where the Diamond was embedded in the head of a statue of the Hindu moon god. When the temple was plundered in the 11th century, the stone’s protectors moved it to the holy city from Benares, where the god Vishnu commanded them and their descendants to guard it “to the end of the generations of men.” In the 18th century, a Mughal emperor had the Diamond stolen, and in 1799, the devilish Herncastle stole it from Seringapatnam, in the process killing a man who promised that “The Moonstone will have its vengeance yet on you and yours!”
The novel’s long first section is set in Yorkshire in 1848, at the residence of the Lady Julia Verinder and her wealthy family. It is narrated by the Verinders’ butler Gabriel Betteredge, who begins with a quote from his favorite book, Robinson Crusoe, and goes on to explain that the family lawyer Mr. Bruff and Mr. Franklin Blake (a cousin of Rachel Verinder) are putting together a written record of the Diamond’s theft. After some digressions, he recounts the multi-talented but spendthrift “universal genius” Franklin Blake’s return to England at the age of 25, after more than a decade living and attending schools in Europe, to which his eccentric father had sent him. The same day as Franklin’s arrival, three Indian men who appear to be traveling magicians come to the Verinder estate, presumably looking for a place to stay, which Betteredge’s daughter Penelope plans to give them. Betteredge then tries to comfort the distraught ex-convict maid Rosanna Spearman at the Shivering Sand, an expanse of sinister quicksand on the coast near the Verinders’ house, but Franklin Blake shows up unexpectedly and Rosanna leaves.
At the Shivering Sand, Franklin reveals a secret to Betteredge: he has the Moonstone, which the late Colonel Herncastle has willed to Rachel Verinder as her 18th birthday present. Franklin proclaims that the Diamond carries a curse or at least a conspiracy—Herncastle lived the rest of his “solitary, vicious, underground life” estranged from his family, receiving death threats, and paranoid that he would be killed for the Diamond. Herncastle may have given Rachel the Diamond as a gesture of goodwill and reconciliation, but may have also sought revenge by gifting them a curse. Indeed, Franklin has noticed a suspicious Indian-looking man follow him to the bank whenever he has business concerning the Moonstone, and he thinks he might have something to do with the three jugglers who have mysteriously shown up in Yorkshire. But the bank is still the safest place for the Diamond, and Franklin leaves it there for the month until Rachel’s birthday. During this month, the Indians disappear and Rachel and Franklin grow very close, painting her bedroom door together for hours and inciting suspicion about whether they might marry. But Franklin has competition: the wealthy, handsome, and charitable Godfrey Ablewhite, another cousin of Rachel’s, will come for her birthday and is clearly seeking her hand.
On Rachel’s birthday, Franklin gives Rachel the Diamond, and Lady Julia is immediately distraught to hear it has come from her estranged brother. At dinner, 24 guests join the family, including the eccentric and socially inept doctor Mr. Candy, who argues with Franklin about the value of his profession, and the mysterious Anglo-Indian traveler Mr. Murthwaite, who scares away the three Indians when they return to the house that night and tells Franklin and Betteredge that the Diamond puts its owner in serious danger. Sure enough, the next morning, someone has stolen the Diamond from Rachel’s cabinet, although the Indians could not have possibly entered the house.
Local police officer Superintendent Seegrave comes to the scene and declares that the thief is “some person in the house.” He ruthlessly interrogates everyone, infuriates Rachel, and searches the servants’ possessions. Fortunately, the illustrious London detective Sergeant Cuff soon arrives, fires Seegrave, and begins a more tactful investigation; he immediately realizes that a paint smear on Rachel’s door will lead to the killer’s identity, since it must have happened late the previous night, the same time as the Diamond’s disappearance. Inexplicably, Rachel is the only one who refuses to let Cuff search her possessions. She also grows furious with Franklin Blake despite their budding relationship, and refuses to talk with him until his departure. Rosanna, who also seems to have feelings for Franklin, begins behaving erratically and arouses everyone’s suspicion. Cuff investigates Rosanna, who he learns has recently replaced her nightgown (likely the one stained with the paint from Rachel’s door) and was also planning to leave her job. But when Rachel decides to leave home for some time, Cuff determines that the Diamond was never stolen, and that Rachel still has it.
The same day, Cuff discovers that Rosanna has drowned herself at the Shivering Sand. He reports to Lady Julia that he believes Rosanna and Rachel were working together and develops a detailed plan to expose their partnership; Julia instead decides to tell Rachel about Rosanna’s death. Rachel declares “she has never spoken a word in private to Rosanna.” Julia takes her to London and fires Cuff, who leaves dutifully after predicting that Betteredge will soon hear from the three Indians, a London gem dealer named Septimus Luker, and Rosanna’s friends, the Yolland family. Astonishingly, all three come true: Limping Lucy, the Yollands’ daughter, leaves a letter for Franklin Blake (who has already left for Europe), and the newspaper reports that “three strolling Indians” have been harassing Mr. Luker in London. Betteredge’s narrative, and the first section of the book, ends here.
The novel’s second narrator is the hypocritical Christian fanatic Miss Clack, Julia’s estranged niece. As soon as Julia and Rachel arrive in London, Clack attaches herself to them, as she wants to convert them to her moralistic religious thought, looks forward to partaking in their gossip, and desperately needs money. She next reports that the three Indians attacked, restrained, and searched not only Mr. Septimus Luker, who apparently deposited the Moonstone in his bank for safekeeping, but also Clack’s beloved Godfrey Ablewhite, whom she considers a “Christian Hero” and who serves on the committees for women’s charities alongside her. This has aroused suspicion about Godfrey’s possible role in the theft, but when he tells Rachel (whom Clack considers dishonorable and unladylike), she signs a document declaring him innocent.
In private, Julia reveals to Miss Clack that she is terminally ill and asks Clack to serve as a witness for the signing of her will; Clack is excited by Julia’s impending death, because it means she has an opportunity to save Julia’s soul by converting her to Christianity in her remaining days. Clack begins at once by offering Julia numerous religious pamphlets, which she rejects, and then hiding them strategically around her house. When Clack discovers that Godfrey is visiting but does not want to speak with her, she hides in the curtains and is astonished to watch Godfrey propose marriage to Rachel, and then persuade her to accept. Just minutes thereafter, Julia dies downstairs (but Clack decides not to attend her funeral).
Rachel moves to Brighton with the Ablewhites, and Clack decides to save her soul instead. One day, the lawyer Mr. Bruff visits and talks with Rachel; the next day, Rachel declares she “shall never marry Mr. Godfrey Ablewhite.” She tells Godfrey and he wholeheartedly agrees to cancel the engagement, but his parents do not: Mr. Ablewhite yells furiously at Rachel and then at Miss Clack when she tries to intervene with some Christian pamphlets. Desperately, Clack offers to become Rachel’s new guardian, and Rachel immediately refuses. Clack ends her narrative “reviled by them all, deserted by them all,” and “never [sees] Rachel Verinder again.”
The novel’s next narrator is the lawyer Mr. Bruff, who first explains why Rachel and Godfrey really ended their engagement: Godfrey only wanted Rachel’s money, which Julia’s will prohibited him from getting. Secondly, Bruff explains that one of the Indians visited him at his office to request a loan; in fact, Septimus Luker received the same visitor (but Bruff notes that the Indian was far more respectful and professional than Luker). After talking with an adventurous colonist named Mr. Murthwaite, Bruff realizes that the Indian man really wanted to learn what a normal loan repayment term would be, in order to determine when Luker will have to take the Moonstone out of the bank. Murthwaite is sure that the Indians will try to steal it at this time—late June of the following year, 1849.
Franklin Blake, editor of all the narratives, takes over the story with his return to England upon his father’s death in 1849. When he arrives, he remembers his history with Rachel and determines to win back her heart, or at least discover why she so suddenly turned against him after the Moonstone’s theft and has refused to contact him since. He goes to Yorkshire and receives the letter Rosanna has left with Limping Lucy, in which Rosanna directs him to pull up a chain at the Shivering Sand. At the end of this chain, he finds a tin case with a letter and a paint-stained nightgown inside. But the nightgown is not Rosanna’s; it is his own.
Astonished, Franklin begins to drink while he and Betteredge read Rosanna’s letter. She proclaims her love for him and explains that she hid his stained nightgown and made him a new one as a “means of shielding [him] from being discovered.” Franklin feels guilty for unwittingly contributing to Rosanna’s suicide, but also still does not understand how he could have stolen the Diamond, since he was not drunk and does not sleepwalk. However, this does help explain Rachel’s behavior towards him after the theft, and he visits her, whereupon she confirms that she “saw [him] take the Diamond with [her] own eyes!” She is still furious at him, but also clearly still loves him. After their meeting, Franklin returns to Yorkshire, where he meets with the old family doctor Mr. Candy, who fell sick on the night of Rachel’s birthday and has never recovered—unable to hold a train of thought, Candy insists he has something to tell Franklin but cannot remember what it is.
Fortunately, Candy’s assistant Ezra Jennings, a hideous and terminally ill but sincere and ambitious fellow doctor, has managed to piece together Candy’s disconnected thoughts and learned that, on the night of Rachel’s birthday, Candy slipped laudanum (opium) into Franklin’s drink after dinner as a practical joke; they had been arguing about the value of medicine, and Franklin had been sleeping badly because he recently quit smoking. Jennings, who happens to be addicted to laudanum, believes that Franklin could have easily taken the Diamond under the influence of the drug, but known nothing of it the next morning. He proposes an ambitious experiment: they will recreate the events of the previous year, from Franklin quitting smoking to resetting the house exactly as it was on the night of the theft, and then slip Franklin laudanum again and see what happens. Franklin agrees, and they begin preparing for the experiment, which Ezra Jennings recounts in detail in his journal.
Ezra Jennings’s journal, the next section of the narrative, covers the preparations leading up to his “experiment” with Franklin Blake; most importantly, he enlists Gabriel Betteredge and Mr. Bruff to act as witnesses to the experiment, although they are both quite reluctant and lack faith in Jennings’s science. Rachel herself also insists on being present, as she hopes the experiment will exonerate Franklin, and her new guardian, the histrionic Mrs. Merridew, insists on accompanying her as a “chaperone.” On the night of the experiment, Jennings slips Franklin the laudanum and talks to him about the Diamond; at night, Franklin gets up in a daze and walks to Rachel’s room, grabs the experiment’s decoy Diamond, and falls asleep in Rachel’s sitting-room. The experiment both succeeds and fails: it proves that Franklin did initially, unwittingly steal the Diamond; but it does not give any clue as to where the Diamond might be now. Jennings ends his journal despairing about his “friendless and lonely life,” but pleased to have brought Franklin and Rachel back together.
Franklin Blake picks up the narrative again for the next section, in which he goes with Mr. Bruff, Bruff’s young assistant Gooseberry, and Sergeant Cuff to search for the Diamond in London. They watch Mr. Luker take the Moonstone out of the bank and then follow various suspects for the rest of the day; Gooseberry turns out to have picked the right one, a suspicious man “dressed like a sailor” whom the others thought was a spy for the Indians, but was actually the man with the Diamond. The group of investigators goes to the pub where Gooseberry saw the sailor check in and another man follow him. Surely enough, the sailor has not been heard from—and then is found dead in his room, from which the Indians seem to have stolen the Moonstone. Cuff realizes, however, that the sailor is wearing a disguise; he pulls it off and reveals the man he had come to suspect of the crime: Godfrey Ablewhite.
The novel ends with a series of brief narratives. In the first, Cuff presents the evidence confirming that the Indians murdered Godfrey Ablewhite and left England with the Diamond, before explaining Godfrey’s motives for stealing the Diamond in the first place: despite his public image as a morally upstanding philanthropist, in reality Godfrey had a mistress and villa outside London, and spent 20,000 pounds of money from a trust that was not his, and that he needed to replace immediately. He had two options: take from Rachel’s estate, or sell the Moonstone. The next short narrative is a letter from Mr. Candy, in which he recounts Ezra Jennings’s death and burial in an unmarked grave. The final narrative is from Gabriel Betteredge, who praises Robinson Crusoe yet again before announcing that Franklin and Rachel have married, and Rachel is now pregnant. The novel’s Epilogue, in three short narratives, explains how the Indians brought the Moonstone back to their country and managed to evade the British authorities who tried to intercept them along the way. The last of these narratives comes from the traveler Mr. Murthwaite, who gets caught up in a mass pilgrimage to the temple of Somnauth, where he watches the three Indians he had last seen in Britain unveil the statue of the moon god, restored to its proper glory with the Moonstone in its forehead.