When Godfrey Nickleby inherited five thousand pounds from his uncle, he bought a farm in Devonshire. When he died, his eldest son, Ralph, inherited the bulk of the estate and went to London where he managed to increase his fortune by financial speculation and sharpness. His brother, Nicholas, remained in Devonshire and also speculated but lost it all. He took to bed, said good-bye to his wife and two children (his son Nicholas and his daughter Kate) and died, leaving his family with no money but with a hope that his brother Ralph would look after Mrs. Nickleby and the children, though the two brothers had not been close since they reached adulthood.

Ralph Nickleby runs a business of unknown nature, but which generates a great deal of money. His clerk, Newman Noggs, had once been a gentleman, but, having run into financial difficulties, had come to Ralph for a loan, but was instead given the lowly job of clerk. Ralph Nickleby attends a meeting of the United Metropolitan Improved Hot Muffin and Crumpet Baking and Punctual Delivery Company to commence its business by request of Parliament. It is also decided that a petition be presented to Parliament for the elimination of muffin street-sellers, out of concern for their safety, but in actuality to prevent competition.

Ralph receives a letter telling him that his brother is dead (which does not upset him that much) and that his widow and two children are in London (which does upset him). He does not want poor relatives hanging about him, so he goes to the address where Mrs. Nickleby is staying. He talks to Miss La Creevy, a miniature portrait painter and Mrs. Nickleby’s landlady, that Mrs. Nickleby is poor and it would be best if Miss La Creevy throw her out. Miss La Creevy says that she hopes, if Mrs. Nickleby cannot afford to pay her rent, that her family will help her out. Ralph tells her that, as he is the only family, he will not do this. He visits Mrs. Nickleby and her children without any expression of sympathy for their loss. He tells Mrs. Nickleby that her children must learn to support themselves and her. He proposes that Kate find a position with a dressmaker. For Nicholas, Ralph presents an advertisement for a school teacher at Dotheboys Hall in Yorkshire. Though the requirements include a Master of Arts, which Nicholas does not have, Ralph feels sure that he can arrange for Nicholas to be given the position. Nicholas agrees, fantasizing that perhaps he might make some connection with nobility, which will lead to his and his sister’s security.

Ralph and Nicholas meet with the one-eyed schoolmaster Wackford Squeers, head of Dotheboys Hall. After Ralph’s recommendation (or threats), Squeers agrees to hire Nicholas as assistant schoolmaster, telling him to meet him at the Saracen’s Head the next morning to leave by coach for Yorkshire. Ralph sends Nicholas on an errand, delivering papers to Noggs at Ralph’s office in Golden Square. On taking the papers, Noggs seems upset to learn that Nicholas is going to Yorkshire by his uncle’s efforts, seemingly wanting to tell the boys some truth about his uncle.