The Story of Lucy Gault starts on June 21, 1921. Ireland is in the midst of civil unrest and anti-English violence. On that night, there is an intrusion in Lahardane, the home of the well-to-do Gault family, when three boys attempt to burn the family home down. Captain Everand Gault shoots his rifle to scare them away but unintentionally wounds one of the boys, Horahan. He asks the town priest, Father Morrissey, to pass on his regrets concerning the incident, but his apology goes unacknowledged. A letter that Everand writes to them also fails to generate a response. The result of a personal visit to the boy's home is the same. These interactions lead Heloise Gault, Captain Gault's wife, to fear that another attempt to burn their house is inevitable. She feels that because she is English, her presence is drawing attention to the house, and the only possible course of action is for them to abandon Lahardane and move back to England.

Lucy, the 8-year-old daughter of Heloise and Everand, has had, heretofore, a pleasant childhood. She basks in her parents' adoration and wanders around the family estate, free of any cares. This summer, she befriends a stray dog, and her only complaint is that her parents do not share the same feeling of affection for this dog. Her world is turned upside down when she is told of the plan to move back to England. She does not understand that it is a solution that is as hard for her parents as it is for her. She hatches a plot to change their mind. On the night before their planned departure, she runs away. Her idea is that they will find her quickly, but the scare will be enough for her parents to take her resistance seriously.

A series of mistaken assumptions and an injury that leaves Lucy unable to return home mislead her parents into believing that Lucy has thrown herself into the ocean where sharks have eaten her. They eventually abandon their search and leave Lahardane devastated. They do not, however, go to England as they've told their Mr. Sullivan, their lawyer, and Henry and Bridget, long-time servants to whom they've entrusted the care of Lahardane. They wander Europe aimlessly until they reach Montemarmona, where they lead lives of self-imposed exile. Everand is not completely in accord with this plan, but out of his deep love for his grieving wife, he acquiesces.

In the meantime, Lucy is discovered by Henry on the brink of death. She gets well, but the ankle she has broken does not heal perfectly, leaving her with a permanent limp. When telegrams to Heloise and Everand bring no response, Mr. Sullivan starts a search for them in Europe to no avail.

Time passes, Lucy grows up, and still her parents remain out of touch and ignorant about her survival. Lucy does not lose faith that they will one day return, she will be forgiven, and all will be in order again. After she is graduates from school, she continues to live with Bridget and Henry, leading a quiet life of reading and bee-keeping. Her guilt has turned her into a reclusive young woman, with only Mr. Sullivan and Canon Crosbie as her only visitors.

One day, this changes when Ralph, a tutor for the Ryalls boys in town accidentally stumbles into Lahardane. Lucy and Ralph fall in love, but Lucy cannot accept Ralph's entreaties to marry him for she does not feel she deserves to be loved until her parents forgive her. Ralph perseveres for many years, but when World War II breaks out, he enlists. When, upon his return, Lucy still does not relent, he is forced to accept that Lucy will never marry him.

When the war starts, Heloise and Everand move to the Italian-speaking part of Switzerland where Heloise contracts influenza and dies. Everand buries her there, and after the war continues his wanderings, but he finally returns to Lahardane, not with plans to stay, but just to visit. Upon his arrival, he discovers that Lucy has been alive all along.

The reunion of Lucy and her father happens a year after Ralph marries someone else. This predicament causes some torment for Ralph, but he knows that if he sees Lucy, he will leave his wife, so he does not. Lucy continues to love only Ralph and resigns herself to loving a married man. Her relationship with her father is awkward after all the intervening years. She finds herself rejecting him, and he finds himself wanting too much. But over many years, they learn to accept love each other again. One night, Everand goes to sleep, and does not wake up. Lucy takes care of Henry and Bridget as they get older, and they, too, eventually pass away.

After her father's death, she starts to visit Horahan, the boy her father had wounded so many years ago. After being tormented by guilt and the delusion that he killed Lucy as a child, Horahan has been committed to a mental asylum where he lives for 17 years. Upon his death, Lucy marches in his funeral procession. Witnessing this, two nuns visit Lucy, enthralled by her amazing peace. The book aptly ends with the description of the scenery she sees from her window, "The avenue has gone shadowy, the outline of its trees stark against the sky. The rooks come down to scrabble in the grass as every evening at this time they do, her companions while she watches the fading of the day."