When Nicholas Nickleby was nineteen years old, his father died, bankrupt. A short time after their bereavement, Nicholas, his sister Kate, and their mother set out for London. While there, they hope that the late Mr. Nickleby’s brother, Ralph, might be willing to do something for them. Ralph Nickleby, a miserly moneylender, grudgingly allows his sister-in-law and Kate to move into empty lodgings he owns, and he secures a position for Nicholas as assistant to Wackford Squeers, who operates a boys’ boarding school in Yorkshire.

Nicholas, leaving his mother and sister in Ralph’s care, travels to the school and finds it a terrible place where the boys are starved and mistreated almost beyond human imagination. Nicholas is forced to endure the situation, for his uncle had warned him that any help given to his sister and mother depends upon his remaining where he had been placed. A crisis arises, however, when Wackford Squeers unjustly and unmercifully beats an older boy named Smike. Nicholas intervenes, wresting the whip from Squeers and beating the schoolmaster with it instead. Immediately afterward, Smike and Nicholas leave the school and start walking toward London.

In London, meanwhile, Ralph Nickleby tries to use Kate to attract young Lord Verisopht into borrowing money at high rates. He also finds work for Kate in a dressmaking establishment, where there is a great deal of labor and almost no pay. Kate does not mind the work, but she is deeply distressed at the leers she has to endure when invited to her uncle’s home to dine with Lord Verisopht and Sir Mulberry Hawk. Not long afterward, the dressmaker goes bankrupt, and Kate becomes a companion to a wealthy but selfish and neurotic woman.

When Nicholas arrives in London, he seeks out Newman Noggs, his uncle’s clerk, who had promised to help him if it were ever in his power. Newman Noggs helps Nicholas clear himself of the false charges of being a thief that had been brought against him by Squeers and Ralph Nickleby.

With some notion of becoming sailors, Nicholas and Smike decide to go to Bristol. On the way, they meet Vincent Crummles, a theatrical producer, whose troupe they join. Both Smike and Nicholas are successful as actors. In addition, Nicholas adapts plays for the company to produce. After some weeks, however, Nicholas receives a letter from Newman Noggs warning him that his presence is urgently required in London. Nicholas leaves hurriedly and arrives in London late that night. Not wishing to disturb his family, Nicholas stays at an inn, where he encounters Sir Mulberry Hawk and Lord Verisopht and overhears them speaking in derogatory terms of Kate. Nicholas remonstrates with them and demands to know their names. In the altercation, Sir Mulberry’s horse bolts and the baronet is thrown from his carriage and severely injured.

Newman asks Nicholas to return because Kate, exposed to the insulting attentions of Sir Mulberry and Lord Verisopht, is increasingly miserable. Both Mrs. Nickleby and the woman to whom Kate is a companion fail to see past the men’s titles and are flattered at the acquaintance, and Kate is forced to be often in their company. For Sir Mulberry it is a point of honor to seduce her.

After Nicholas accidentally learns of the situation, he removes his mother and sister to new and friendlier lodgings, and all intercourse with Ralph Nickleby ceases. However, the future seems quite bleak, for Nicholas is long unsuccessful finding work in London. At an employment agency to which he applies, he becomes acquainted with a kindly gentleman, one of the philanthropic Cheeryble brothers. Hearing that the young man is destitute and believing him to be deserving, the brothers give Nicholas a job in their countinghouse at a decent salary and make a cottage available to him for himself, Kate, and their mother.

One day, a beautiful young woman visits the Cheeryble brothers, and Nicholas falls in love with her at first sight. Kate gradually falls in love with the Cheeryble brothers’ nephew, Frank. Only Smike seems unhappy, for he has fallen in love with Kate, yet realizes his limitations more than ever before now that he is in cultivated surroundings. Once Wackford Squeers and Ralph Nickleby see that Nicholas has given a good home to Smike, they begin to conspire to kidnap Smike. Apart from the wish for revenge, Squeers is motivated by the fact that Smike has been an immensely valuable, unpaid drudge at the school. Smike is caught twice but escapes, and Nicholas is successful in keeping him out of Squeers’s clutches, but the boy’s happiness is short-lived. He dies of tuberculosis a few months later.

By then, Nicholas has discovered that the young woman with whom he has fallen in love, Madeline Bray, is the daughter of a bankrupt ne’er-do-well who lives off the little income she makes by sewing and painting. Unknown to Nicholas, Ralph Nickleby and a fellow miser, Arthur Gride, are planning to force Madeline into a marriage with Gride, who is seventy years old. Fortunately, Madeline’s father dies an hour before he is to hand his daughter over to the old miser. Nicholas arrives on the scene and takes the young woman to his home, where she is cared for by Kate and his mother.

Meanwhile, Gride’s old housekeeper leaves in a fit of jealousy and steals some of her employer’s papers. One of the documents is a will that, if known, would make Madeline Bray a rich woman. Ralph learns of the will and persuades Squeers to steal it. When he does, however, Frank Cheeryble and Newman Noggs catch him and turn him over to the police. The prisoner confesses his part in the plot and also tells about the conspiracy between Ralph and Gride to get Madeline’s fortune. An old employee of Ralph appears and reveals to the Cheeryble brothers that Smike is Ralph’s son; years ago, as a way of revenging himself on his employer, he had told Ralph that his son had died in infancy. Ralph, when given the news, returns home and hangs himself.

Thinking that Frank Cheeryble is in love with Madeline, Nicholas asks the Cheeryble brothers that she be taken care of elsewhere. The Cheeryble brothers, in their good-hearted way, take the situation under observation and make it possible for both pairs of lovers, Nicholas and Madeline, as well as Frank and Kate, to be married shortly thereafter.

Years pass, and both couples prosper. Nicholas invests his wife’s fortune in the Cheeryble brothers’ firm and later becomes a partner in the house along with Frank Cheeryble. Newman Noggs, who had helped Nicholas so many times, is restored to respectability; he had been a wealthy gentleman before he had fallen into Ralph Nickleby’s hands. Old Gride, who had tried to marry Madeline for her money, is murdered by robbers; Lord Verisopht is killed in a duel with his false friend Sir Mulberry Hawk, who subsequently also comes to a violent end.