First-person narrator Nick Carraway introduces the novel, insisting that based on advice his wealthy father once gave him he strenuously avoids judging people; however, he admits that this habit often causes him problems, with particular reference to events concerning a man named Gatsby. Nick leaves New York—where these events took place—to return to the Midwest. Toward the end of the novel, Nick says that a year or two has passed since the story took place.
Nick opens his story by recounting that he, a young man from Minnesota, has moved to New York, renting a low-cost cottage located in West Egg, the less fashionable of two fictional seaside communities alongside one another on Long Island Sound (the other one being East Egg). Nick visits his second cousin, Daisy Buchanan, whose husband, Tom, was a football player at Yale and who now is a phenomenally wealthy "polo player", as Gatsby introduces him to other party goers. The Buchanans have an opulent mansion in East Egg. Here, Nick meets Jordan Baker, a lady friend of Daisy's and well-known golfer.
Nick is the next-door neighbor of Jay Gatsby, an extremely wealthy man known for hosting lavish parties in his own enormous mansion, where every Saturday, hundreds of people come. Although many of the guests are uninvited, Nick is soon personally invited by a rather formal invitation through one of Gatsby's butlers, and finds himself becoming involved in this party scene, although he claims to despise the entire concept of mindless entertainment.
Gatsby seems to be a mysterious character whose great wealth is a subject of much rumor; none of the guests Nick meets at Gatsby's parties know much about his past. No one has met Gatsby and because of this people make up rumors as to what he does to gain all of this money. At one point during the party, a man begins a conversation with Nick, as the man claims to recognize Nick from the US Army Third Division in the war. Nick affirms that he was in this Division, and remarks on the strange absence of their host. The man reveals himself to be Gatsby, surprising Nick who had expected Gatsby to be much older and not as personable. In fact, Nick and Gatsby begin a close friendship.
Nick is initially confused as to why Gatsby throws parties without introducing himself to his guests, and even more confused when Gatsby drives him to New York and discloses to Nick, without explaining his motivations for doing so, a seemingly far-fetched version of his upbringing. Nick's female acquaintance Jordan Baker eventually reveals to Nick that Gatsby was holding these parties in hopes that Daisy, his former love, would visit by chance. Also through Jordan, Gatsby requests Nick to arrange a meeting with Daisy. Nick obliges, and the reunion is initially awkward but ultimately successful, and soon Daisy and Gatsby begin an affair. In the meantime, Nick and Jordan Baker, whom Nick re-encounters at one of Gatsby's parties, start a relationship, which Nick already predicts will be superficial.
Eventually, in and leading up to an explosive scene at the Plaza Hotel in New York, Daisy's husband Tom notices Gatsby's love for Daisy and alleges that Gatsby is a bootlegger, in front of Gatsby, Daisy, Nick, and Jordan. Tom claims that he's been researching Gatsby and expresses his hatred towards Gatsby. In reply Gatsby urges Daisy to tell Tom that she never loved Tom; Gatsby hopes to erase the last five years so that she may simply be with him. Daisy does tell Tom, but hesitantly. Tom sees that he still has a chance with Daisy, and denies her and Gatsby's claim. Tom tells Daisy and Gatsby to drive together from the hotel to Tom and Daisy's house on Long Island; Tom mocks Gatsby by claiming he knows nothing can happen between Daisy and Gatsby. Tom takes his time getting home with Nick and Jordan.
George Wilson, owner of an auto repair garage on a desolate road between Manhattan and northern Long Island, is also arguing with his wife Myrtle (with whom Tom is having an affair since the beginning of the novel). She runs out of the house, only to be hit by Gatsby's car which is being driven by Daisy. Myrtle is killed instantly, and Daisy and Gatsby speed away. Later, as Tom, Jordan, and Nick are on their way home, they notice the car accident. Tom remarks casually that Wilson will finally have some business, but soon realizes that his lover Myrtle is dead. During this grotesque scene, Wilson comes out of his shop, half-insane and half in shock, and rants about having seen a yellow car. Tom leads Wilson into a private place and tells him that the yellow car was not Tom's and that Tom was driving Gatsby's yellow car earlier in the day (when Tom's group was driving to the hotel and stopped by at Wilson's for gasoline). Wilson does not seem to listen, and Tom, Jordan, and Nick leave. Wilson seems to become insane. He stays up all night rocking back and forth, muttering nonsense, while his neighbor patiently watches over him. Wilson thinks he makes the connection that whoever was driving that yellow car must have been the man Myrtle was having an affair with and makes up his mind to find the yellow car.
By this point, over the past several weeks Nick has abandoned his role as an outsider observing Gatsby's life and has instead become Gatsby's close friend. When Nick finds out about the accident, he advises Gatsby to run away for a week. The two end up having breakfast at Gatsby's pool, with Nick telling him, "They're [Daisy, Tom, Jordan] a rotten crowd. You're worth the whole damn bunch put together." Upon hearing this, Gatsby smiles his trademark smile, which Nick described as, "It faced—or seemed to face—the whole world, then concentrated on you with an irresistible prejudice in your favor."
Wilson finds his way to Tom's house with a gun and Tom, while packing for an escape trip with Daisy, names Gatsby as the driver of the yellow car that killed Wilson's wife. In the meantime, Gatsby is floating in his pool, overwhelmed with depression, thinking that Daisy no longer loves him, and hoping for a call from her. There Wilson finds and kills Gatsby. Wilson then commits suicide on Gatsby's lawn not far away.
Nick tries to find people who will attend Gatsby's funeral, only to find that not even Gatsby's crooked business partners will be there to mourn for him. Finally, Nick meets Mr. Gatz, Gatsby's father, who comes to the funeral, apparently still trapped in the past. He shows Nick a well-worn photograph of Gatsby's house and a notebook that Gatsby wrote in as a youth showing his drive and ambition.
Aside from Gatsby's servants, only three people attend his funeral: Nick, Mr. Gatz, and "Owl Eyes," a man who had attended one of Gatsby's parties earlier that summer, but whom Nick hadn't seen since. After severing connections with Jordan and a brief run-in with Tom, Nick returns permanently to the Midwest, reflecting on Gatsby's desire to recapture the past.
