After a quarrel with his wife, Susan at a county fair, the drunken Michael Henchard offers to sell Susan their daughter, Elizabeth-Jane to the highest bidder. A sailor buys the two women, and takes them away to sea.
Eighteen years later, Henchard has done well for himself. He is a sobre, hard working, wealthy grain merchant, and has become the mayor of the town of Casterbridge. He is still however, a rash individual and is somewhat unpopular with the town's folk. Further more, he keeps his past, including the sale of his wife and child, a secret. This becomes a problem when he develops a romantic attachment to one Lucetta Le Seuer. To keep Lucetta's reputation from being sullied, Henchard is required to marry her. But due too his still standing marriage with Susan, such a relationship would be bigamous. Susan then unexpectedly arrives at Casterbridge with Elizabeth-Jane.
Also arriving is Donald Farfrae, a Scottish grain merchant. He becomes a business partner and confidant of Henchard. Henchard courts and remarry's Susan, pretending she is a new aquaintance and not his previous wife. Lucetta is devestated at being abandoned by Henchard. From this point onward, Henchard's fortunes go into steep decline. A combination of bad luck, and the rising popularity of the more amicable Farfrae, threatens to undermine Henchard's wealth and standing. He becomes jealous of Farfrae, who Elizabeth-Jane has fallen for. The two wish to marry, but Henchard prohibits it. Susan dies, leaving a letter for Henchard. The letter reveals that Elizabeth-Jane is not Henchard's daughter (who had died at sea in infancy), but a daughter of the sailor Susan was sold to. Henchard chooses to keep this a secret.
Lucetta has inherited a sum of money, and has moved to Casterbridge. There, she hopes to rekindle her relationship with Henchard. Whilst she is there, a witness at the fair, eighteen years back, reveals Henchard's rowdy past. Lucetta decides she does not want to persue a relationship with Henchard. Instead, she falls for Farfrae. Henchard, now financially desperate from his bad businesses and lack of fortune, realises he must marry Lucille for her money. He tries to pressure her into marriage, but she reveals that she has just married Farfrae in secret. Henchard is bankrupt, whilst Farfrae buys his old business. farfrae tries to offer work and help to Henchard (who he has always regarded as a friend, rather than a competator). He does not realise how much Henchard dislikes him.
Henchard and Lucille's past is shockingly revealed by the seedy underclass of the town. In reaction to the scandal, Lucille dies from an epileptic seizure. Henchard returns to drink. The sailor returns and reuinites with Elizabeth-Jane. Elizabeth-Jane marries Farfrae. When the sailor goes to meet Henchard, he discovers that the man has died quietly, and without a funeral.
As is typical of Hardy's stories, Peripeteia, or "the changing of fortunes", features as a plot device. Whereas one character will decline in status, another will work their way up the social heirarchy. In this case, Henchard is something of a traditional Tragic hero, unable to escape his fated demise. Meanwhile, Farfrae plays the role of the outsider, catalysing social change and bringing in new ideas. It is he who introduces farming machinary, bringing the industrial revolution to the pastoral county.