Captain Lingard sails into Singapore to find that his protégé, Willems, whom he rescued as a starving twelve-year-old and who rose to be manager of a shipping company, has been sacked for embezzlement. After an arrogant Willems is thrown out by his customarily acquiescent wife, he feigns suicide in sight of Lingard, who rescues him once more. Lingard takes Willems upriver to his trading-post in Sambir, a remote Malayan tribal community, via his secret route, the source of his wealth and the envy of other traders. The post is run by Almayer, married to Lingard's adopted daughter. Sensing a potential rival, Almayer is dismayed when Lingard goes on a short trading voyage, leaving Willems in his charge.

Lingard is asked for gunpowder for fishing by Babalatchi, counsellor to the blind Badavi, a once-powerful pirate chief, and his daughter Aissa, who have settled alongside the native tribal village. Suspecting a plot to enable an Arab trader to challenge his monopoly, Lingard refuses, asserting his intention to keep the peace and prosperity he has brought to the tribe; Babalatchi defiantly questions Lingard's claim to know what's best for the natives.

In Lingard's absence, Willems is resentful that Almayer double-checks on him and gives him work he cannot carry out as he does not speak the native language. Distracted and bored, he canoes to the opposite shore, increasingly fascinated with Aissa. Babalatchi, observing his interest, invites him to meet the Arab trader, Alagappan, who broaches the subject of Lingard's secret trading route. Almayer's wife is concerned about Willems' fate if he persists in pursuing the ruthless Aissa, who fought beside her father. He confesses his warring emotions.

During celebrations for Almayer's birthday, while Almayer, as always, dotes obsessively on his daughter, Willems leaves abruptly to find Aissa. After their nocturnal embrace, he remains on the natives' bank and attempts in vain to wrest Aissa from her father. Willems is scandalised when Babalatchi blatantly asks him to disclose Lingard's secret river route to Alagappan. To pressure Willems, Babalatchi advises Aissa and her father to hide from him. After a long search, Willems is led to Aissa by a devoted river-boy. Willems confesses his love for her. Badavi, who has already cursed him, tries to knife Willems and they struggle. Willems visits Almayer, in turn cajoling and threatening to divulge the secret route, and begging to be set up in a trading post on the other bank so that he can serve Lingard while remaining with Aissa. Almayer sends him packing and prompts his daughter to shout abuse after him.

Willems guides the Arab trader's ship through Lingard's secret entrance. Almayer is shocked when he realises it is not Lingard's long-awaited return. Almayer attempts to repulse with guns the advance of Willems and a native crew towards the stores, but his helpers run away. Willems rescues Almayer from the natives' attack, only to orchestrate sewing him into his hammock, suspending it high in the trees and rocking it over a fire. Aissa gleefully joins the sadistic play, but when she discovers that Willems has failed to pass on Babalatchi's message that her father lies dying, she returns too late.

On Lingard's return, Almayer recounts the 'fiendish outrage' perpetrated on him, complains bitterly that Lingard is more generous to the undeserving than to those who serve him well and informs him that the triumphant Arab trader has exiled Willems and Aissa among Badavi's people. Taking a canoe to search for Willems, Lingard encounters Babalatchi, who gives him a rifle, suggesting he deal with Willems himself. When Lingard reaches their place of exile, Aissa wordlessly tries to stop him from harming Willems. A distraught Willems, hit by Lingard, refuses to strike back and pleads that he cannot lose the only man who has cared for him. But Lingard, deeply hurt and morally outraged, casts him out. Refusing to shoot Lingard as Aissa urges, Willems watches Lingard's canoe disappear into the horizon and turns away from Aissa who, seeing this, drops her head into her lap in utter despair.