[[TheCrusades The Third Crusade]] has just ended, and the combatants are returning home. The cruel and lascivious [[TheKnightsTemplar Templar]], Brian de Bois-Guilbert and his [[CorruptChurch worldly companion]], Prior Aylmer, despite their misdirection by the swineherd Gurth and his companion, [[TheJester the jester]] [[ObfuscatingInsanity Wamba]], are guided by a mysterious Palmer to the home of Cedric the Saxon, a noble who wishes to re-establish the ancient English kingdom by marrying his ward Rowena to the last descendant of Saxon royalty, Athelstane of Coningsburgh. Also sheltering at Cedric’s house is the Jewish moneylender, Isaac of York. In the course of dinner, it is revealed that Cedric has disowned his son, Wilfred of Ivanhoe, for attaching himself to the Norman king [[RichardTheLionHeart Richard Cœur-de-Lion]] and for daring to woo Rowena (who returns his love); it is further revealed that Bois-Guilbert is Ivanhoe’s [[ArchNemesis mortal enemy]], who defies him to mortal combat at an upcoming tournament. That night the Palmer forces helps Isaac to escape from the Templar (who had planned to kidnap him and send him to his ally, the ferocious and greedy [[TheBrute Front-de-Bœuf]]); in gratitude, Isaac supplies him with a horse and armour. The Palmer somehow[[note]] even dim readers will already have figured out that the Palmer ''is'' Ivanhoe[[/note]] convinces Gurth to serve as his squire for the upcoming tournament.

At the tournament, the evil Prince John and his followers are plotting to seize the throne, but are unnerved to learn that King Richard has escaped captivity. Meanwhile, the tournament is dominated by two unknown knights, the "Disinherited Knight" and the [[BlackKnight Black Sluggard]], who defeat Bois-Guilbert and his companions, and by a Saxon archer called ''[[RobinHood Locksley]]." The Disinherited Knight, who chooses Rowena to be the tournament's Queen, is revealed to be Ivanhoe when he faints from his wounds; he then disappears. In fact, he has been carried off by Isaac and his beautiful and noble daughter, Rebecca. Unfortunately, Cedric, Rowena, Athelstane, Isaac, Rebecca, and Wilfred are all captured by Bois-Guilbert's ally Maurice de Bracy and taken to Front-de-Bœuf's castle. There, Front-de-Bœuf demands ransoms, de Bracy tries to [[AbhorrentAdmirer woo]] Rowena, and Bois-Guilbert threatens to [[AttemptedRape ravish]] Rebecca, who is tending Wilfred. Meanwhile, Gurth, Wamba, Locksley, and the Black Sluggard rally an army of outlaws to assail the castle. Wamba manages to trick his way into the castle, disguised as a friar, where he switches places with Cedric. Cedric, on his way out, manages to [[AxCrazy stir up]] the crone Urfried -- formerly the Saxon princess Ulrica -- to vengeance against Front-de-Bœuf (who has, incidentally, been struck down by the BlackKnight). She sets fire to the castle. In the confusion of its fall, Rowena, Wilfred, and Isaac are rescued, but Athelstane is struck down and Rebecca carried off by the Templar, who takes her to one of his [[TheKnightsTemplar order]]'s houses. There she is discovered by the [[KnightTemplar fanatical Grand Master]], Lucas de Beaumanoir, who concludes that she has [[BurnTheWitch bewitched]] Bois-Guilbert. She demands a TrialByCombat, and sends for Ivanhoe to come fight for her.

Meanwhile, the BlackKnight, who has been attacked by Prince John's men, is saved by Locksley and his outlaws; it is [[TheReveal revealed]] that the BlackKnight is really [[RichardTheLionHeart King Richard]] and that Locksley and his band are really [[RobinHood Robin Hood and his Merrie Men]]. Richard hastens to Athelstane’s funeral to reconcile Cedric and his son ... when it is suddenly revealed that Athelstane is alive (!!!) and now refuses to stand between Wilfred and Rowena. However, Wilfred has disappeared (again), to arrive just in the nick of time to fight for Rebecca, though he has not yet recovered from his wound. Fate, however, intervenes; though Wilfred does not actually touch him, Bois-Guilbert falls over, dead, killed by his own turbulent emotions. Rebecca is declared innocent; Richard shows up to punish the guilty; Wilfred and Rowena are to marry and Rebecca and Isaac decide to emigrate to Spain, where Rebecca will devote herself to an eternal maidenhood; Normans and Saxons are united under one English king, and all ends happily... [[TheEndOrIsIt for now]].