The Moonstone opens with a written account of the large, yellow, Moonstone diamond, sacred to Hindus as the centerpiece in their idol of the god of the Moon. It has been commanded that three Brahmin priests must always guard the stone. John Herncastle, while fighting for the British Army in India in 1799, killed the three Brahmins who were then guarding the diamond and took it back to England with him.
The novel shifts forward to the mid-1800s. Gabriel Betteredge, steward to Lady Verinder, born Julia Herncastle, has been asked by Franklin Blake, Lady Verinder's nephew, to write a full account of the events surrounding the theft of the Moonstone from Lady Verinder's house. Sir John Herncastle, a dishonorable man and family outcast, has left the Moonstone to Lady Verinder's daughter Rachel to be given to her on her eighteenth birthday. Franklin Blake has been appointed to deliver the diamond. Franklin suspects that John Herncastle knew that his life was in danger because of the Moonstone and that John had willed the ill-fated diamond to Rachel as a gesture of malice towards Lady Verinder. Franklin's suspicions are further roused when he notices Indian men following him, both in London and at Lady Verinder's country estate.
On the night of Rachel's birthday, her cousin Godfrey Ablewhite, a famous philanthropist, arrives and proposes marriage to her. Rachel, obviously in love with Franklin, refuses him. Franklin presents her with the diamond, which she wears through a dinner party and then places in her sitting room overnight. In the morning, the diamond is gone and Superintendent Seegrave of the local police is called. Rachel acts strangely, refusing to help with the investigation and treats Franklin harshly. Seegrave proves himself inept, and Franklin calls for the famed Sergeant Cuff of London to take over the case. Cuff suspects Rosanna Spearman, a housemaid of Lady Verinder's and a reformed thief, of having played a part in the theft. Cuff believes that Rosanna was working in cooperation with Rachel Verinder, who stole her own diamond to pay personal debts. Several days after the theft, Cuff tracks Rosanna and finds that she has gone to great pains to hide a package and has then committed suicide. Lady Verinder's household is in disarray at the startling news of Rosanna's death and the incredible news of Cuff's suspicion of honest Rachel. Cuff is dismissed from the case, and Lady Verinder moves her household to London in hopes of distracting Rachel, who seems distraught, but will not explain herself.
Miss Clack, a satirical character of hypocritical piety, contributes the next narrative in London and describes the circumstances under which Rachel reluctantly agreed to marry Godfrey Ablewhite and then broke off the engagement. Mr. Bruff, the family lawyer, next explains that Rachel broke off the engagement because she had information that Godfrey intended to marry her for money (Lady Verinder has recently died, and Rachel is now an heiress). Mr. Bruff also notes the continued presence of the Indians in London, who seem to have tracked the diamond to the bank of one moneylender, Septimus Luker, to whom the diamond seems to have been pledged.
Franklin Blake, the next narrator, describes his discovery that Rosanna Spearman has left a letter to him that explains the motivation of her suicide—she was in love with him and had concealed evidence that he was the thief of the Moonstone. But she killed herself when he continued to ignore her. Franklin is astounded—he has no memory of taking the gem, but an interview with Rachel confirms that she saw Franklin take the gem with her own eyes.
Franklin continues investigating, hoping to clear his name. Ezra Jennings, assistant to Lady Verinder's doctor, Dr. Candy, provides an explanation. Mr. Candy fell ill the night of Rachel's birthday and had been nearly unintelligible since, but Jennings believes that Candy had given Franklin a dose of opium without telling him in order to settle a dispute about modern medicine. Franklin took the diamond under the influence of the drug, reacting to his anxiety about the safety of the gem. This hypothesis is proven when Jennings stages a reenactment of the night the gem was stolen, and Franklin replicates his actions exactly, again under the influence of opium. Franklin is vindicated, and Franklin and Rachel are reconciled and engaged.
Back in London, Mr. Bruff has tracked the diamond from Septimus Luker to a sailor with a dark complexion. When Franklin and Sergeant Cuff locate the sailor, the man has been killed. The sailor is Godfrey Ablewhite, disguised. Cuff correctly determines that Godfrey has been leading a double life. Franklin, under in the influence of opium, had given the gem to Godfrey after taking it from Rachel's room and asked Godfrey to store it safely in his father's bank. Godfrey had kept the gem and pawned it for money and had just redeemed it and was planning to take it to Europe to be cut up and sold. He had been killed by the Indians, who have returned to India with the Moonstone and restored it to the forehead of their idol.
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