Beauty's Punishment is a continuance of the legendary fairy tale, "Sleeping Beauty," albeit with an extremely erotic twist. Ann Rice, writing as A.N. Roquelaure, has taken the beloved princess into a dark and terrible world, where the princess and Tristan, Beauty's lover, are forced into slavery. Beauty and Tristan realize what egregious errors they'd made in judging their individual situations and how those misjudgments have made everything worse, including separation and temporary end to their relationship.

The book begins with Beauty being awakened by the Crown Prince after 100 years asleep. The long sleep was the result of a spell being placed upon the princess by an evil queen, who was jealous of the princess' beauty. As detailed in the curse, Sleeping Beauty would only awaken when kissed by a prince. A Crown Prince came upon Beauty in the woods and kissed her, ending the spell.

Beauty's Punishment reveals that not only did the Crown Prince kiss Beauty but also ravaged her. Beauty was immediately smitten by the Crown Prince and agreed to go with him to the Court of Queen Eleanor, the Crown Prince's mother. According to the rules of the kingdom, if Beauty's parents agreed, the young princess would become part of the kingdom as a slave in order to teach her all the ways of obedience and refinement. Beauty's parents agree.

At the Court of Queen Eleanor, Beauty becomes the personal slave to the Crown Prince and his mistress, Lady Juliana. Juliana is a former slave, who takes delight in punishing Beauty, obviously forgetting her own days of torture. Due to acts of disobedience, Beauty is sent off to a spring auction where she and other slaves will be sold to the highest bidder. The slave will belong to a new master for a period of three years, which can be extended contingent upon the slave's behavior. During those three years, the slaves must do everything they are told without question or argument. The masters are encouraged to beat, whip and abuse their slaves daily.

Beauty is sold at auction to Mistress Lockley, an innkeeper. As with most of the other masters and mistresses, Mistress Lockley is a cold and unforgiving owner. Beauty and Lockley's other slaves are routinely beaten, abused, offered up as playthings for patrons, and used sexually in every possible way. During Beauty's stay at the Sign of the Lion, Beauty finds love in the form of a ruthless Captain of the Guard and also develops a great fondness for her mistress.

Meanwhile, Beauty's lover, Tristan, has also been sold. Tristan now belongs to Nicolas, the Queen's Chronicler and Chief Historian. Tristan must bear the same hardships and utter humiliation as the other slaves, although Nicolas eventually becomes fond of the new slave. Tristan and Nicolas become lovers, and it appears as if Tristan may stay on with the new master.

Beauty and Tristan are reunited by chance. Nicolas allows the pair to spend time together, as long as he can watch and is not found out by the other masters.

In the end, Beauty and Tristan, who dared not escape, are taken away by a band of horsemen. Not knowing the reason, the slaves have no choice but to cooperate. Taken aboard a Sultan's ship, Tristan and Beauty are treated with a kind of reverence. The story ends while Tristan and Beauty are still aboard the ship, not knowing what will happen when they arrive at the Sultan's palace.