On Christmas Eve, young Pip, an orphan being raised by his sister and her husband, encounters a frightening man in the village churchyard. The man, a convict who has escaped from a prison ship, scares Pip into stealing him some food and a file to grind away his leg shackle. This incident is crucial: firstly, it gives Pip, who must steal the goods from his sister's house, his first taste of true guilt, and, secondly, Pip's kindness warms the convict's heart. The convict, however, waits many years to truly show his gratitude.
At his sister's house, Pip is a boy without expectations. Mrs. Joe beats him around and has nothing good to say about her little brother. Her husband Joe is a kind man, although he is a blacksmith without much ambition, and it's assumed that Pip will follow in his footsteps. Only when Pip gets invited unexpectedly to the house of a rich old woman in the village named Miss Havisham, does Mrs. Joe, or any of her dull acquaintances, hold out any hope for Pip's success.
Indeed, Pip's visits to Miss Havisham change him. Miss Havisham is an old woman who was abandoned on her wedding day and has, as a result, given up on life. She wears a yellowed wedding gown and haunts around her decrepit house, her only companion being Estella, her adopted daughter. Estella is beautiful, and Pip develops a strong crush on her, a crush that turns into love as he grows older. But it is unrequited love, as Miss Havisham has made it her dark life's project to raise Estella as a cruel-hearted girl who will break men's hearts, satisfying Miss Havisham's own desire to spurn love.
Pip frequently visits Miss Havisham, until one day she tells him never to return because the time has come for his apprenticeship with Joe to begin. Having tasted the spoils of a better life, Pip is miserable as a blacksmith and constantly worries that Estella will look through the forge window and see him as horribly common. Estella soon leaves the village, and things progress until one day Mrs. Joe suffers an attack which leaves her mute and incapacitated, although a lot nicer. A young girl about Pip's age, Biddy, comes to live at the house in order to care for Mrs. Joe. Pip again settles into his routine until one night at the village bar a London lawyer, Jaggers, approaches Pip, revealing startling news: Pip has inherited a lot of money from an anonymous benefactor and must leave for London immediately, to become a gentleman.
In London, Pip studies with a tutor and lives with a new and close friend, Herbert. Pip is certain that his benefactor is the rich Miss Havisham. In addition, he becomes convinced that Miss Havisham's financial support, toward his elevated social status, is the result of her desire that he may marry Estella someday. Pip passes many years in London; he remains ashamed of Joe, and they grow apart, Mrs. Joe dies, and though he falls harder and harder for Estella – who seems to get colder and colder by the day – he never confesses his love. Among the people he knows in London are Wemmick, a clerk in Jaggers' office who becomes a friend, and Bentley Drummle, a horrible brute of a boy who begins to make moves on Estella.
One stormy night, Pip learns the true identity of his benefactor. It is not Miss Havisham (who has made many misleading comments indicating it was her), but rather a petty criminal named Magwitch. Magwitch is the convict Pip fed in the churchyard many years ago, and he's left all his money to Pip in gratitude for that kindness, and also because young Pip reminded him of his own child, whom he thinks is dead. The news of his benefactor crushes Pip – he's ashamed of him, and worse yet, Magwitch wants to spend the rest of his days with Pip. Pip takes this on like a dreadful duty, and it's all the worse because Magwitch is a wanted man in England, and will be hung if he's caught.
Eventually, a plan is hatched by Herbert and Pip, whereby Pip and Magwitch will flee the country by rowing down the river and catching a steamer bound for Europe. This must be done on the sly, and further complicating matters is the fact that an old criminal enemy of Magwitch's, Compeyson, is hot in pursuit. Compeyson, it's discovered, is the same man that swindled and abandoned Miss Havisham so many years back. Miss Havisham, meanwhile, is softening a bit, and seems repentant for her life-long mission against love.
Estella has been married to Bentley Drummle, a marriage that anyone can see will be an unhappy one. Just before Pip is to flee with Magwitch, he makes one last visit to Miss Havisham, and finds her filled with regret, wanting his forgiveness. Unfortunately, she gets a little too close to the fire and sets herself ablaze. Pip heroically saves her, but she's badly burned and does eventually die from her injuries.
Pip and Magwitch, along with Herbert, make a gallant attempt to help Magwitch escape, but instead he's captured – pointed out, in fact, by his old enemy Compeyson. Compeyson dies in the struggle, and Magwitch, badly injured, goes to jail. Pip by now is devoted to Magwitch and recognizes in him a good and noble man. Magwitch dies, however, not long before he's slated to be executed. Pip has discovered that Magwitch is actually Estella's father, and on Magwitch's deathbed Pip tells Magwitch his discovery, and also that he loves Estella.
Without money or expectations, Pip, after a period of bad illness during which Joe cares for him, goes into business overseas with Herbert. Joe has married Biddy, and after eleven relatively successful years abroad, Pip goes to visit them out in the marshes. They are happy and have a child, whom they've named Pip. Finally, Pip makes one last visit to Miss Havisham's house, where he finds Estella wandering. Her marriage is over, and she seems to have grown kinder, and wants Pip to accept her as a friend. When the novel ends, it seems that there is hope that Pip and Estella will finally end up together.