The story of "The Three Strangers" is told from a point of view fifty years after the main events occur.

On a rainy evening at Higher Crowstairs, a remote house on a hill about five miles from town, a shepherd's family is celebrating the christening of their second daughter. The house is cozy and full of happy guests. There are nineteen people of various ages and occupations attending the celebration, and they all greatly enjoy one another's company.

Mrs. Fennel, the shepherd's wife, attempts to assert some control over the party to align with her frugal ways. She figures equal amounts of talking and dancing to the fiddle will prevent the guests from developing appetites for her food and drink. Despite careful calculations, her plan does not come to fruition because Mr. Fennel is prone to "exhibit the most reckless phases of hospitality."

As a cheerful dance comes to an end and brings silence to the interior of the cottage, a stranger coming from the direction of the town knocks on the door of the cottage. This man, about forty years of age, gaunt, and dignified, despite his worn clothing, is immediately given a warm welcome. Mr. Fennel, with his boundless generosity, wants nothing more than for this stranger to get out of the rain and rest. The stranger is given mead to drink and tobacco to smoke, and he settles himself in the chimney corner.

In the quiet lapse before the start of the next song, another knock sounds at the door. This time, an older, powerful man in a suit interrupts the party with a request for shelter. He, too, is hospitably admitted, though not quite as warmly as the first man, and he joins the first stranger. They drink mead—much to Mrs. Fennel's dismay—while Mr. Fennel questions the second stranger about his destination; he is on his way to Casterbridge for work. The second stranger sings a song about his occupation: his audience discerns that he is the executioner they had heard was coming to town to conduct a hanging. The first stranger joins him in singing.

Just as the song's third verse begins, another knock sounds at the door. A third stranger timidly glances about the room and flees in terror upon seeing the previous two strangers. The guests of Higher Crowstairs do not know how to react to this event until they hear a gunshot from the direction of town that signals that a prisoner has escaped from the jail. Acting on the assumption that the third stranger fled due to his fright at seeing the hangman and is indeed the escaped prisoner, a constable in attendance orders the guests to chase after him.

With the cottage's ground floor newly empty, both the first and second strangers return inside, seeking more food and drink. They agree that the rest of the guests are more than capable of handling the capture of the third stranger. They bid each other farewell and go their separate ways. Under the direction of Mr. Fennel, the third man is found and brought back to the house.

Upon the party's return to Higher Crowstairs, two officers from the jail are waiting to arrest the escapee. It is to everyone's surprise that the third man is not the escaped prisoner. Rather, the third stranger admits that the escaped prisoner is his brother. The third man's previous fear is attributed to the fact that he was startled to see his brother—the first stranger—comfortably sitting next to the executioner.

The third man explains that the first stranger is a clockmaker sentenced to hang for his crimes. The country people sympathize with him, seeing his death sentence as too harsh a punishment: the sheep was stolen to feed his starving family. Fortunately, the first stranger evades capture and is never seen again.

Decades after the story of the three strangers took place, the narrator explains, the story is as popular as ever among the country folk.