H.M.S. Renown sails from England in 1801 bound for Haiti. Her orders are to destroy privateers in the harbor of Santo Domingo and foment indigent rebellion against the Spanish colonizers. The voyage is interrupted by the captain's developing paranoia and an accident which incapacitates him. The lieutenants, led by Hornblower, take control of the ship and carry out the mission with uneven successes. Upon arrival in Kingston, Renown is received with honors and Hornblower is appointed as acting commander of a sloop-of-war. Temporary peace between England and France thrusts Hornblower and his particular friend Bush ashore on half-pay. Hornblower plays whist and gambles until hostilities resume.

Renown, with 74 guns and commanded by Captain Sawyer, sails from England to Haiti. Her secret orders instruct the captain to attack and sink, burn, capture, or destroy several privateers operating out of the harbor at Santo Domingo and, if possible, to foment indigent rebellion against the Spanish. Lieutenant William Bush joins Renown just hours before she sails; the remaining officers have all served previously. Bush discovers quickly that Captain Sawyer is paranoid beyond reason, encourages the crew to lazy insolence, and constantly suspects the officers of mutiny.

The situation becomes critical and the lieutenants request the ship's surgeon declare Sawyer unfit for command; the doctor declines to do so and the lieutenants then meet in secret to determine whether they should proceed further with relieving the captain. Hornblower, the junior lieutenant, argues that doing so would surely be mutiny. The lieutenants are spared taking action, however, when Sawyer falls down a hatchway and is seriously injured. Suspicions abound that Sawyer was pushed but no evidence is forthcoming. When Sawyer regains his physical health it is obvious that his mind has snapped completely—he sobs hysterically and cringes in fear at the approach of anyone. The ship's surgeon is finally willing to declare him unfit for command and Buckland, the senior lieutenant, takes over command.

Under Hornblower's urging, Buckland reads the ship's orders and determines to carry them out. Renown rather unimaginatively sails directly into the enemy harbor, intending to destroy the privateers by assault. The ship runs aground on a mud flat, though, and is only slowly kedged off under a withering plunging fire composed of heated shot. The indecisive Buckland wavers but under Hornblower's urging launches a stealthy overland surprise attack against the fortress. The attack is difficult but successful. Buckland again wavers as to a proper course of action but Hornblower makes various suggestions which are implemented, resulting in the surrender of the Spanish garrison.

The privateers are taken as prizes and the small fleet sails for Kingston, the holds crammed with prisoners. After several days the prisoners escape and revolt on Renown. They temporarily gain the ship but an alert Hornblower, commanding the largest prize, gathers in the prize crews and counter-attacks in a fierce and successful boarding action. Bush is seriously wounded during the fighting but recovers in time to deliver testimony at a court of inquiry. All the lieutenants are exonerated and Hornblower is given an acting command to return the largest prize to England.

The Peace of Amiens, however, is established and Hornblower, Bush, and thousands of other officers are thrown ashore in England on half pay. Bush lives with his sisters while Hornblower takes a cheap tenement and supports himself by gambling at whist. The two friends meet a few times during the ensuing year and Hornblower meets Marie Mason, and the two come to an informal understanding. The novel concludes with the happy news—happy at least to Bush and Hornblower—that the war is once again joined and they quickly depart for the admiralty to receive their new orders.