The novel, narrated in first-person by eighteen-year-old Mary Katherine "Merricat" Blackwood, tells the story of the Blackwood family. A careful reading of the opening paragraphs reveals that the majority of this novel is a flashback.
As the main portion of the story opens, Merricat, her elder sister Constance, and their ailing uncle Julian live in isolation from the nearby village. Constance has not left the house in six years, seeing only a select few family friends. Uncle Julian, slightly demented and confined to a wheelchair, obsessively writes and re-writes notes for an autobiography, while Constance cares for him. Through Uncle Julian's ramblings the reader begins to understand what has happened to the remainder of the Blackwood family: six years ago, both the Blackwood parents, an aunt, and a younger brother were killed -- poisoned with arsenic, mixed into the family sugar and sprinkled onto blackberries at dinner. Julian, though poisoned, survived; Merricat, sent to bed without supper as a punishment, avoided the arsenic, and Constance, also unscathed, was arrested for and quickly acquitted of the crime. The people of the village openly believe that Constance has gotten away with murder, and the family is ostracized, leading Constance to become something of an agoraphobe. Despite this, the three Blackwoods have grown accustomed to their isolation, and lead a quiet, happy existence. Merricat is the family's sole contact with the outside world, walking into the village twice a week and carrying home groceries and library books, often followed by groups of the village children, who taunt her with a singsong chant:
Merricat is a strange young woman, deeply protective of her sister and a fierce believer in sympathetic magic. As the major action unfolds, Merricat begins to feel that a dangerous change is approaching; her response is to reassure herself of the various magical safeguards she has placed around their home, including a box of silver dollars buried near the creek and a book nailed to a tree. After discovering that the book has fallen down, Merricat becomes convinced that danger is imminent. Before she can warn Constance, a long-absent cousin, Charles, appears for a visit.
It is immediately apparent to the reader that Cousin Charles is pursuing the Blackwood fortune, which is locked in a safe in the house. Charles quickly befriends the vulnerable Constance. Merricat perceives Charles as a demon, and tries various magical means to exorcise him from their lives. Tension grows as Charles is increasingly rude to Merricat and impatient of Julian's foibles, ignoring or dismissing the old man rather than treating him with the gentle courtesy Constance has always shown. In an angry outburst between Charles and Julian, the level of the old man's dementia is revealed when he claims he has only one living niece: Mary Katherine, he believes, "died in an orphanage, of neglect" during Constance's trial.
In the course of her efforts to drive Charles away, Merricat breaks things and fills his bed with dirt and dead leaves. When Charles becomes angry with her, Merricat runs away, but returns for dinner. When Constance sends her upstairs to wash her hands, Merricat pushes Charles' still-lit pipe into a wastebasket filled with newspapers. The pipe sets fire to the family home, destroying much of the upper portion of the house. The villagers arrive to put out the fire, but, in a wave of long-repressed hatred for the Blackwoods, break into the remaining rooms and destroy them. In the course of the fire, Julian dies of what is implied to be a heart attack, and Charles demonstrates his true colors (as the villagers riot and destroy the house, he says only, "Listen, will a couple of you guys help me with this safe?"). Merricat and Constance flee for safety into the woods. Constance confesses for the first time that she always knew Merricat poisoned the family; Merricat readily admits to the deed, saying that she put the poison in the sugar bowl because she knew Constance would not take sugar.
Upon returning to their ruined home, Constance and Merricat proceed to salvage what is left of their belongings, close off those rooms too damaged to use, and start their lives anew in the little space left to them: hardly more than the kitchen and cellar. The house, now without a roof, resembles a castle "turreted and open to the sky." The villagers, awakening at last to a sense of guilt, begin to treat the two sisters as mysterious creatures to be placated with offerings of food left on their doorstep. The story ends with Merricat's observation that she and her sister are happier than ever.