The Ersatz Elevator begins with Violet, Klaus and Sunny Baudelaire embarking on a brand new adventure. Their path has taken them this time to 667 Dark Avenue; the same city where they were born. Although happy to return to the city they loved, their uncertain future is troubling. They soon meet their new guardians, Jerome and Esme Gigi Geniveve Squalor. Esme and Jerome are night and day to one another. Jerome is gentle with a kind heart. Esme is greedy, cruel and obsessed with popularity. Her life revolves around things that are "in" and things that are "out." In fact, her only reason for adopting The Baudelaires was that orphans were "in."

The Baudelaires new home is a spacious penthouse with hundreds of different rooms. Although they are now living in the lap of luxury, lingering concern for their missing friends, the Quagmires, hangs heavily over their heads. They cannot reconcile their own comfort with the danger that their friends are in. The thought that Mr. Poe is now in charge of finding the Quagmires is no comfort to them.

In addition to worrying about their friends, the ever-present threat of Count Olaf looms. The threat is soon realized when an auctioneer named Gunther befriends Esme in preparation for her annual "In Auction." The children recognize him immediately, but everyone else is in the dark.

Now that their hoped for safety has been shattered, Violet, Klaus and Sunny must do all they can to escape Count Olaf's clutches and rescue their friends. With him nearby, they hope their friends are nearby as well, but don't know just how right they are. When nothing seems to come of Olaf's surprise appearance, and he vanishes into apparently thin air, The Baudelaires work to uncover his plot. With their combined talents and skills they discover a passageway that leads from the penthouse down to a hidden room. Inside the room, they find their friends, Isadora and Duncan Quagmire. They try to break them out of their cage, but return to find their friends missing once again.

The Baudelaires have the responsibility to figure out how Count Olaf plans to smuggle the Quagmires out of the city and the "In Auction" seems to be their best bet. The children will have to decipher two red herrings and escape from a surprise set up for them by someone they thought they could trust. Time is running out for the Quagmires and The Baudelaires will need all of their combined resources to get their friends and themselves out of danger before it is too late.