"The Horla" is written in diary format by an unnamed narrator. At the beginning of the story, his entries seem rational and well-informed. But by the end of the story, they have become increasingly unhinged and alarming, indicating a decline in the narrator's mental state.

At the beginning of the story, the narrator is conscious that he is starting to feel unwell. He associates this mysterious illness with a "force" he feels aware of in his house, and he marvels at the depths of what we still don't know about the world. He begins to experience apparent sleep paralysis in his feverish state, and associated feelings of dread when he is in bed at night. He feels like someone is pressing on his chest and trying to suck his life from him. Increasingly, he starts to imagine that somebody is following him when he leaves the house, although when he looks, there is nobody there. At last, he decides to go away for a rest cure to Mont St. Michel, as nothing else seems to help him.

At Mont St. Michel, he has a wonderful time but meets a monk who tells him many local legends, most of them supernatural. The monk tells the narrator that humankind only understands a very small part of what really exists in the world, which makes the narrator pensive. He points out that while the wind is invisible, it is certainly still a real phenomenon with genuine repercussions. 

The narrator returns home and finds that his coachman is also ill and that his old nightmares have returned. He imagines that somebody is sucking his blood while he sleeps. He notes that the contents of his water bottle are being drained in the night, so he sets out some milk for the unseen being—as a test—and finds that it, too, disappears. This being avoids food, however, and only partakes in the water or milk left out. 

There is an interlude when the narrator goes to stay with his cousin, Madame Sable, and dines with her and a hypnotist, Dr. Parent. The doctor successfully hypnotizes Madame Sable despite the fact that nobody believes in his powers; he is able to convince her to go and ask for five thousand francs from her cousin, which she does. Eventually, the doctor removes the effects of the hypnotism from Madame Sable, after which she remembers nothing. This troubles the narrator greatly, as it indicates still greater depths of what cannot be rationally understood.

Returning home, the narrator begins to imagine more and more that he sees the "invisible hand" of this force during the day, and starts to question whether he is going mad. He witnesses a rose break off of the bush as if being pulled by an unseen hand, and this startles him greatly. He begins to talk of the force as "He" and then as "the Horla," stating that he feels it always near him. The narrator claims that he has witnessed an open book turning its pages every so often, without any visible help, as if someone is reading it. Eventually, he "sees" the creature as a mist in the night, and determines that he must kill it. Luring it into his room and locking it in, he then sets the house on fire. He has forgotten the servants, however, and the house becomes a “funeral pile.”

At the end of the story, the house is ablaze, but the narrator is suddenly unsure as to whether he has actually killed the Horla—if he has not, he fears he must kill himself.