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One night, a man called Jack murders a mother, a father, and a daughter. His final target is a baby boy whose room is at the top of the family home. When he reaches the baby’s crib he finds a stuffed teddy bear in the boy’s place. The boy, having escaped his crib earlier that evening, makes his way up the hill and into the graveyard. He is found by two ghosts, Mr. and Mrs. Owens, who wonder how he ended up there. The boy’s dead mother appears before them and begs them to protect her child. Jack enters the graveyard but is taken away by a shadowy stranger named Silas. That evening, the ghosts deliberate what to do with the child. Eventually, the Lady on the Grey, who shows up for every person’s death, gives her blessing and the child is given the Freedom and the Graveyard. Mr. and Mrs. Owens name him Nobody Owens.
Later, four-year-old Bod befriends a five-year-old living girl named Scarlett Amber Perkins. They spend time together in the graveyard. One day they visit a mausoleum in the graveyard and encounter an imaginary corpse called the Indigo Man and the slithering creature named the Sleer. The Sleer tells them about the treasures it protects: a brooch, a goblet, and a knife. Outside the tomb, Scarlett’s parents worriedly search for her. The next time Bod sees Scarlett, Scarlett tells him that her family is moving to Scotland.
When Bod is six years old, he is upset to learn that his guardian Silas will be leaving the graveyard and that he will be taken care of by Miss Lupescu. Miss Lupescu teaches Bod about the different creatures of the world and gives him food he hates. Feeling alone and underappreciated, Bod agrees to go on an adventure with three ghouls who take him through a ghoul-gate. Bod becomes increasingly afraid of the ghouls who suggest that he turn into a ghoul himself. Luckily, Miss Lupescu, in the shape of a menacing dog-like creature, rescues Bod and explains to him that she is a Hound of God. For the rest of the month before Silas’s return, Bod warms up to Miss Lupescu, even feeling sad when she leaves the graveyard.
When Bod is eight years old, he meets a witch named Liza Hempstock in the unconsecrated portion of the graveyard named Potter’s Field. After hearing that Liza was not buried with a headstone to mark her grave, Bod takes it upon himself to buy her a headstone. He takes the brooch from the Sleer and heads to Abanazer Bolger’s antiques store in town. Transfixed by the brooch and curious to learn more about where Bod attained it, Abanazer locks Bod into a storage room. As Bod thinks about how to escape, Liza appears in the room. Liza, eavesdropping on Abanazer and his acquaintance Tom Hustings, learns that Bod is in danger. Liza casts a spell on Bod helping him Fade, so that when Abanazer and Tom return to the room he is invisible. Still locked inside the room, Bod and Liza hear the men argue about the brooch, until they eventually get into a physical fight and knock each other out. Bod escapes the room, retrieves the brooch, and picks up a black card with the name Jack written on it.
On his way back to the graveyard, an angry and disappointed Silas intercepts Bod. Back at the graveyard, Bod returns the brooch to the Sleer. Before heading home, Bod, using a paintbrush and a paperweight he took from Abanazer’s store, makes a headstone for Liza.
A ten-year-old Bod witnesses the Danse Macabre, which is a special day in winter when the living and the dead dance with one another. In the book’s interlude, an organization of men from all over the world are eating dessert. One man tells Jack that he must finish the job—killing Bod—that he failed to do years ago. When Bod is eleven years old, Silas tells Bod what he knows about Jack. Bod suggests that it would be a good idea for him to go to school and learn about the world, so he can be prepared to defend himself against Jack. At first, Bod is able to go to school without any issues, but an altercation with two bullies forces Silas to pull him out in order to keep him safe.
When Bod is fourteen years old, he reunites with Scarlett Amber Perkins after her mother separates from her father and returns to the town. Bod explains to Scarlett about his family’s murder, and to help Bod, Scarlett asks a local historian, Mr. Frost, to help her learn more. Mr. Frost tells Scarlett to bring Bod to his house so that he can reveal what he knows.
At Mr. Frost’s house, Bod learns that he is, in fact, the man called Jack. Jack’s other associates appear and Bod hides Scarlett in the Indigo Man’s mausoleum. With the help of the ghosts of the graveyard, Bod gets rid of Jack’s associates, who followed him to the cemetery. In the process, Bod learns that they belong to an ancient order called the Jacks of All Trades who, according to a prophecy, must kill Bod in order to save themselves. Jack holds Scarlett hostage in the mausoleum. When Bod arrives, he claims himself the master of the Sleer and the Sleer drags the man named Jack away. A frightened Scarlett calls Bod a monster, then has her memories erased by Silas. When Silas returns to Bod, he takes him out for pizza and reveals that Miss Lupescu died fighting against the Jacks of All Trades in Krakow.
In the final chapter, fifteen-year-old Bod notices his ability to communicate with the dead is fading. Mr. Owens tells Bod that he was the best son he could’ve hoped for. Liza kisses Bod on his way to visit Silas and says that she will miss him. Bod doesn’t understand why the ghosts are acting this way. Silas explains to Bod that it is time that they must both leave the graveyard. Before Bod leaves, Miss Owens sings him a lullaby from his youth and expresses how proud of Bod she is. Bod knows that he will miss his family in the graveyard, but leaves knowing that it is now time to join the world of the living.