In a future America after the third great war, machines have taken all dignity from the working man. Doctor Paul Proteus is an up-and-coming engineer and manager who is in charge of the Ilium Works. His father helped establish the machines that now run the economy, and Paul is slated to follow in his footsteps. Paul, though, is overcome with doubts about the new world his father imagined, and his doubts make him vulnerable. Before he knows it, he's lost his wife and his job, and he's been conscripted as the leader of the revolution of man against machine.

As the novel begins, Doctor Paul Proteus is manager of the Ilium Works, the highest paid and most powerful man in Ilium, New York. He also has the highest IQ in Ilium, in a world where your opportunities are decided by machines, based on your IQ and your performance on aptitude tests. Paul is married to Anita, a competitive, ambitious woman whose IQ was too low for her to go to college. Anita mistakenly (or connivingly) told Paul that she was pregnant, prompting his marriage proposal. Later they discovered that Anita is barren.

Paul is vaguely dissatisfied with his life and the world, and he longs for a simpler, nobler life. His old friend Finnerty appears at Paul's house. Finnerty had been promoted higher than Paul, to Washington, D.C., but he's even more dissatisfied. He's quit his job and given himself over to drunkenness. Finnerty causes Paul to get into trouble with the law, and then disappears into the "average man" world across the river from the Ilium Works, where the people displaced by machines are paid minimal wages by the government to do unnecessary work.

Paul has already decided to quit his job and become a farmer when his bosses try to recruit him as a spy. Finnerty, they say, has become a radical rebel leader, part of an underground movement against machines called the Ghost Shirt Society. They plan to pretend to fire Paul, so that he can infiltrate the rebel organization as a spy. Paul tries to quit, but his bosses don't believe him. They think he's just playing along with their scheme. Paul's wife, Anita, after hearing he's been fired, leaves Paul for her new lover, one of Paul's competitors.

Alone and purposeless, Paul wanders into a bar. His drink is drugged, and the next thing he knows, he's in the headquarters of the Ghost Shirt Society. As predicted, Paul is being recruited. More than that, because Paul's father was so important and famous, the Ghost Shirt Society has Paul slated as their figurehead. They've already announced to the world that Paul is leading the rebellion against machines controlling mankind. Paul is arrested, but his bosses still believe he's acting as a spy. When they ask him to inform on the conspirators, Paul realizes he believes in the Ghost Shirt Society and refuses, taking on his appointed role as leader.

Paul is tried for treason, and in the middle of his trial, the rebellion begins. Paul is whisked out of the courtroom by the rebels. Ilium is overtaken. Once the rebellion starts, though, the leaders can't stop it. The people rise up and begin destroying all the machines, without preference. Although the Ghost Shirt Society is successful in a few cities, the rebellion is quickly squashed. Ilium is the last stronghold. As a new day dawns, the people put themselves to work, rebuilding what they've just destroyed. The leaders are distraught, seeing that human nature makes men build and build, without thinking about what they are building. Finally, the leaders give themselves over to the authorities, becoming martyrs to their cause.