The novella, set in England, deals with a sedate, bored lower-class couple - Michael and Margaret Banks - who are lured into fronting a race-horse scandal. Michael Banks is befriended by William Hencher, who is friends with a gang into which he fell during World War II. After his mother's death, he wants to repay the couple for their allowing him to rent a room in their home (where he lived with his mother 20 years prior). Knowing Michael likes horses, Hencher invites him to the horse heist, which goes awry, killing Hencher. The gang members, realizing that Margaret is becoming suspicious of Michael's absence, has Michael call and tell her to meet him at a party. In order to assure that Michael will front as the owner of the stolen stallion, Rock Castle, they keep Margaret secure while distracting Michael with two women, both sexual predators. The gang rapes and kills Margaret after Michael finds too much pleasure in one femme fatale, Sybilline, the mistress of the kingpin, Larry. After realizing his infidelity, Michael attempts to redeem himself by thwarting the race, which is set up in order to allow Larry to retire to America in comfort.
The work is told in a framed narrative, with the commentary of the sports writer Sidney Slyter prefacing each chapter (at the request of Hawkes' publisher New Directions, who feared that the novella would be too confusing otherwise). The style is one of broken, dreamlike sequences, which suspend time in a quintessentially postmodern fashion. The novella's accumulation of events acts as wish fulfillment for the Bankses, and ends in chaos and their deaths.
The novella was seen as a turning-point in Hawkes' body of work; influential American critic Leslie Fiedler contributed a preface arguing for Hawkes' greatness. Southern writer Flannery O'Connor (a friend of Hawkes) praised the novella as well, commenting in a letter that "You suffer The Lime Twig like a dream. It seems to be something that is happening to you, that you want to escape from but can't."