The film opens in 1935 when T.E. Lawrence is killed in a motorcycle accident. At his memorial service at St Paul's Cathedral, a reporter tries (with little success) to gain insights into this remarkable, enigmatic man from those who knew him.
The story then moves backward to World War I, where Lawrence is a misfit British Army lieutenant, notable for his insolence and education. Over the objections of General Murray, Mr. Dryden of the Arab Bureau sends him to assess the prospects of Prince Faisal in his revolt against the Turks. On the journey, his Bedouin guide, Tafas, is killed by Sherif Ali for drinking from his well without permission. Lawrence later meets Colonel Brighton, who orders him to keep quiet, make his assessment, and leave. Lawrence ignores Brighton's orders when he meets Faisal. His outspokenness piques the prince's interest.
Brighton advises Faisal to retreat after a major defeat, but Lawrence proposes a daring surprise attack on Aqaba; its capture would provide a port from which the British could offload much-needed supplies. The town is strongly fortified against a naval assault but only lightly defended on the landward side. He convinces Faisal to provide fifty men, led by a sceptical Sherif Ali. Teenage orphans Daud and Farraj attach themselves to Lawrence as servants. They cross the Nefud Desert, considered impassable even by the Bedouins, travelling day and night on the last stage to reach water. One of Ali's men, Gasim, succumbs to fatigue and falls off his camel unnoticed during the night. When Lawrence discovers him missing, he turns back and rescues Gasimand Sherif Ali is won over. He gives Lawrence Arab robes to wear.
Lawrence persuades Auda abu Tayi, the leader of the powerful local Howeitat tribe, to turn against the Turks. Lawrence's scheme is almost derailed when one of Ali's men kills one of Auda's because of a blood feud. Howeitat retaliation would shatter the fragile alliance, so Lawrence declares that he will execute the murderer himself. He is then stunned to discover that the culprit is Gasim, the very man he risked his own life to save in the desert, but he shoots him anyway.
The next morning, the Arabs overrun the Turkish garrison. Lawrence heads to Cairo to inform Dryden and the new commander, General Allenby, of his victory. While crossing the Sinai Desert, Daud dies when he stumbles into quicksand. Lawrence is promoted to major and given arms and money for the Arabs. He is deeply disturbed, however, confessing that he enjoyed executing Gasim, but Allenby brushes aside his qualms. He asks Allenby whether there is any basis for the Arabs' suspicions that the British have designs on Arabia. When pressed, the general states that they do not.
Lawrence launches a guerrilla war, blowing up trains and harassing the Turks at every turn. American war correspondent Jackson Bentley publicises Lawrence's exploits, making him famous. On one raid, Farraj is badly injured. Unwilling to leave him to be tortured by the enemy, Lawrence shoots him dead before fleeing.
When Lawrence scouts the enemy-held city of Deraa with Ali, he is taken, along with several Arab residents, to the Turkish Bey. Lawrence is stripped, ogled, and prodded. Then, for striking out at the Bey, he is severely flogged before being thrown into the street. The experience leaves Lawrence shaken. He returns to British headquarters in Cairo but does not fit in.
A short time later in Jerusalem, General Allenby urges him to support the "big push" on Damascus. Lawrence hesitates to return but finally relents.
Lawrence recruits an army that is motivated more by money than by the Arab cause. They sight a column of retreating Turkish soldiers who have just massacred the residents of Tafas. One of Lawrence's men is from Tafas; he demands, "No prisoners!" When Lawrence hesitates, the man charges the Turks alone and is killed. Lawrence takes up the dead man's Battle Cry; the result is a slaughter in which Lawrence himself participates. Afterwards, he regrets his actions.
Lawrence's men take Damascus ahead of Allenby's forces. The Arabs set up a council to administer the city, but the desert tribesmen prove ill-suited for such a task. Despite Lawrence's efforts, they bicker constantly. Unable to maintain the public utilities, the Arabs soon abandon most of the city to the British.
Lawrence is promoted to colonel and immediately ordered back to Britain, as his usefulness to both Faisal and the British is at an end. As he leaves the city, his automobile is passed by a motorcyclist who leaves a trail of dust in his wake.