It is 1960s America, a few decades after the end of World War II. This America looks very different, however: The Allied powers have lost, and Germany and Japan have emerged as dual world powers. Japan has taken the Pacific Coast States, and Germany has taken the East Coast States and the South. Both Germany and Japan are vying secretly against each other. Germany wants to destroy Japan by nuclear attack and successfully colonize space. Japan plans to leverage power by gaining intelligence on Germany’s special plastics that are fueling Germany’s lead in the space race.

Robert Childan owns a shop selling traditional American ethnic objects to wealthy Japanese customers who now fetishize the native objects of the country they’re occupying. Childan is a white American who is resentful of his new lower-class status. One of his more demanding customers, Nobusuke Tagomi, frequently sets Childan on edge, especially when Tagomi mispronounces his name. When the Kasouras, a young Japanese couple, come into Childan’s store, compliment his selections, and invite him back to their home for a special showing, Childan is soothed.

Frank Frink is a Jewish factory worker who has just been fired from his job at the Wyndam-Matson metalworking factory. Being Jewish limits his options—if he heads East, he’ll be extradited by the Germans and likely killed. A co-worker, Ed McCarthy, encourages Frink to start a jewelry-making business, using the skills he’s gained working at the factory, which makes forgeries of the high-value authentic American antiques like those sold at Childan’s store. Frank misses his ex-wife, Juliana, who has moved to the Rocky Mountain States looking for a better life. 

Juliana is a judo instructor. She meets and becomes intrigued by an Italian truck driver, Joe Cinnadella, who claims to be an Italian war veteran. They begin a relationship and start to travel together. Juliana becomes obsessed with a novel called The Grasshopper Lies Heavy, written by a mysterious man named Hawthorne Abendsen who supposedly lives in a fortified home (a “High Castle”) in a remote area of Colorado. Abendsen’s book tells the story of an alternate history where the Allied powers did win. The Grasshopper Lies Heavy ends up in the hands of most of the characters at various points.
 
Nobusuke Tagomi, in addition to being Childan’s customer, is a high-ranking Japanese trade official. He is set to meet Baynes, a man claiming to be a Swedish businessman whom he hopes will give him intelligence on Germany’s special plastics. Tagomi regularly consults the I Ching, as do several of the other characters. When he gets an ominous result, suggesting Baynes is not what he seems, Tagomi becomes convinced Baynes is a spy. Tagomi’s suspicion is bolstered when Baynes says he can’t meet Tagomi until another man, an elderly retiree named Yatabe, joins them. Tagomi experiences a moment of clarity when, after the German Chancellor unexpectedly dies, Tagomi listens to a rundown of the violent and cruel people who are his potential successors. At this moment, Tagomi realizes just how evil the Germans are.

Frank and Ed try to market their jewelry to Childan, who agrees only to sell their items on consignment. Ed is a poor businessman and there is no market for original American works. Childan sends one of the pieces to his customer Betty Kasoura by way of her husband, Paul, hoping to seduce her. Paul tells Childan that the piece is a true work of art that has spiritual power, and he suggests Childan try to mass-produce it for profit. However, Paul’s suggestion is merely a test to judge Childan’s character. Childan, realizing Paul’s challenge, refuses the offer, and gains a degree of the respect he desperately seeks from the Japanese. 

Juliana grows increasingly suspicious of Joe, whose stories don’t seem to line up and whom she discovers is brandishing a knife and carrying an oddly heavy pen. While on a trip together to Denver, Joe suggests they make a detour to Abendsen’s home since Juliana is so fascinated with his novel. Juliana discovers Joe is an assassin sent by the Germans to kill Abendsen. After briefly contemplating suicide, she decides to kill Joe instead, which she does in their hotel room. Juliana then heads to Abendsen’s house to warn him that the Germans are after him. 

Baynes turns out to be a German defector named Rudolf Wegener, coming to warn the Japanese of the German’s plan to destroy the Japanese home islands by nuclear annihilation. Yatabe, the man he was waiting for before meeting with Tagomi, turns out to be retired Japanese General Tedeki. Tagomi was just a foil to elude the Reich, who have been on Baynes’s trail. Fortunately for Baynes, the Reich official sent to catch him, Hugo Reiss, has been too busy engaging in a rivalry with another official to expedite Baynes’s capture. When the German intelligence agents finally do catch up to them, Tagomi kills the assassins and saves Baynes’s life. In a moment of defiance against the Germans, he also refuses to sign their extradition order for Frink, a man he doesn’t know, who has been arrested on suspicion of forgery and being a Jew. Frink returns to his jewelry business.

Back in Colorado, Juliana makes it to Abendsen’s house, which she discovers is not a castle but a regular house. He’s even entertaining people when she arrives. Juliana forces Abendsen to tell her why he wrote the book. He evades her question, but his wife intervenes and tells Juliana that Abendsen wrote the book consulting the I Ching, indicating that essentially the I Ching wrote the book. When they consult the I Ching together in Abendsen’s home to ask it why it wrote the book, the I Ching responds, “Inner Truth.”