The book's protagonist is an English scientist and gentleman inventor living in Richmond, Surrey in Victorian England, and identified by a narrator simply as the Time Traveller. The narrator recounts the Traveller's lecture to his weekly dinner guests that time is simply a fourth dimension, and his demonstration of a tabletop model machine for travelling through it.

He reveals that he has built a machine capable of carrying a person, and returns at dinner the following week to recount a remarkable tale, becoming the new narrator.

In the new narrative, the Time Traveller tests his device with a journey that takes him to A.D. 802,701, where he meets the Eloi, a society of small, elegant, childlike adults. They live in small communities within large and futuristic yet slowly deteriorating buildings, doing no work and having a frugivorous diet. His efforts to communicate with them are hampered by their lack of curiosity or discipline, and he speculates that they are a peaceful communist society, the result of humanity conquering nature with technology, and subsequently evolving to adapt to an environment in which strength and intellect are no longer advantageous to survival.

Returning to the site where he arrived, the Time Traveller is shocked to find his time machine missing, and eventually works out that it has been dragged by some unknown party into a nearby structure with heavy doors, locked from the inside, which resembles a Sphinx. Later in the dark, he is approached menacingly by the Morlocks, ape-like troglodytes who live in darkness underground and surface only at night. Within their dwellings he discovers the machinery and industry that makes the above-ground paradise possible. He alters his theory, speculating that the human race has evolved into two species: the leisured classes have become the ineffectual Eloi, and the downtrodden working classes have become the brutish light-fearing Morlocks.

Deducing that the Morlocks have taken his time machine, he explores the Morlock tunnels, learning that they feed on the Eloi. His revised analysis is that their relationship is not one of lords and servants but of livestock and ranchers. The Time Traveller theorizes that intelligence is the result of and response to danger; with no real challenges facing the Eloi, they have lost the spirit, intelligence, and physical fitness of humanity at its peak.

Meanwhile, he saves an Eloi named Weena from drowning as none of the other Eloi take any notice of her plight, and they develop an innocently affectionate relationship over the course of several days. He takes Weena with him on an expedition to a distant structure that turns out to be the remains of a museum, where he finds a fresh supply of matches and fashions a crude weapon against Morlocks, whom he fears he must fight to get back his machine. He plans to take Weena back to his own time. Because the long and tiring journey back to Weena's home is too much for them, they stop in the forest, and they are then overcome by Morlocks in the night, and Weena faints. The Traveller escapes only when a small fire he had left behind them to distract the Morlocks catches up to them as a forest fire; Weena is presumably lost in the fire, as are the Morlocks.

The Morlocks use the time machine as bait to ensnare the Traveller, not understanding that he will use it to escape. He travels further ahead to roughly 30 million years from his own time. There he sees some of the last living things on a dying Earth, menacing reddish crab-like creatures slowly wandering the blood-red beaches chasing butterflies in a world covered in simple lichenous vegetation. He continues to make short jumps through time, seeing Earth's rotation gradually cease and the sun grow larger, redder, and dimmer, and the world falling silent and freezing as the last degenerate living things die out.