To initial appearances, Pale Fire is the final, unfinished poem by renowned poet John Shade, with a forward and commentary by fellow university instructor Charles Kinbote. However, through the commentary, this novel becomes the story Charles Kinbote longs to tell, the story of Charles X, the exiled, beloved king of Zembla. Kinbote proves himself an unreliable narrator, and the reader must attempt to discern the layers of illusive truth behind the tale.

In the fictitious forward, Kinbote introduces the poet John Shade and the 999-line unfinished poem called "Pale Fire" that he wrote in the last month of his life. Kinbote proves himself to be at odds with other critics of Shade and introduces himself as a neighbor and friend of the late poet.

The poem itself includes imagery of reflection and focuses on themes of death. An autobiographical work, it details Shade's relationship with his wife and daughter and the unattractive daughter's suicide after being rejected by a date. In the following commentary, instead of examining the poem, Kinbote uses the poem as an opportunity to tell his own tale.

Kinbote hints that he is, in fact, the exiled King Charles X (known as Charles the Beloved) of Zembla. He tells the complex story of King Charles, filled with details that no outsider could possibly know. The king is scholarly and well-loved. His father, whose hobby is aircraft, dies in a plane crash, and Charles is not close to his mother. After her death, he is pressured to generate an heir, but he is gay and cannot consummate a relationship with a woman to produce an heir. He does marry a queen, but she eventually leaves Zembla to live on the Riviera.

Revolutionaries take over the government of Zembla, and they hold King Charles captive in the castle. Charles finds an old secret passage that leads him out of the castle, and he escapes through the mountains. Loyal subjects aid his flight by disguising themselves as the king, so that they confuse the police. The king visits his wife on the Riviera and then leaves for America to teach at a university while he's in exile.

Meanwhile, Kinbote mixes with this tale information about his relationship with his neighbor, John Shade, and the reader begins to realize that although Shade was kindly and tolerant toward Kinbote, they were not the great friends Kinbote claims. Shade and other members of the university see Kinbote as delusional.

Kinbote details (again, giving information he cannot possibly know) the journey of an assassin on his way to kill the exiled king. In Kinbote's story, the assassin shoots wildly and accidentally kills Shade instead of his real target, Kinbote, the exiled King Charles. The reader can gather, though, that in truth the killer is an escaped lunatic who mistakes Shade for the judge who sent him to an asylum for the criminally insane.