The story takes place during a time when it was common for a group of sailors to band around a handsome sailor who would be superior to his peers in every way. The narrator recalls a male African named Billy Budd who fit that description. He had recently entered the Naval force was taken into duty on the H.M.S. Bellipotent by Lieutenant Ratcliffe. He accepts the offer immediately but his old ship crew and master do not approve of it. During his departure, Ratcliffe boards the Rights-of-Man and starts drinking. The shipmaster, Captain Graveling, begins recounting memories of Billy’s power over the other sailors on the ship and how he had exerted his dominance over one of them known as “The Red Whiskers". Graveling realizes that Billy’s departure would surely bring back disruption on the ship. While leaving on the cutter, Billy waves goodbye to his old crew and Ratcliffe immediately snaps at him to sit down.
On the Bellipotent, Billy is less dominant among the more experienced sailors. However, he is not intimidated. The narrator reveals that he was orphaned and left at birth but that he might possibly have noble ancestry. While he was powerful and animalistic, he was sometimes rendered speechless.
The narrator talks about the Great Mutiny at Nore, which was a cause of huge distress for the British Navy in 1797. This event was even more disastrous than the French Revolution and Napoleon’s armies. The British sailors were not rebellious by nature. Many of the men who took part in the Mutiny at Nore had made up for their sins by participating in the battle of Trafalgar. The commander of the British fleet in the Trafalgar battle, Admiral Sir Horatio Nelson, represented a more beautiful age, an age rid of all the technological advancements that took over the next age. His thirst for glory and traditional methods of going into battle made him the most famous naval commander. Although these mutinies were partly successful, the naval fleet was skeptical about further mutinies and hence, they sent Nelson to inspire the sailors and earn their loyalty.
We are introduced to Captain “The Honorable” Edward Fairfax Vere, who is an officer and comes from an aristocratic background. He is a simple man who does not show off his status. However, he is determined and purposeful. He was nicknamed “Starry Vere" by his cousin because he sometimes got lost in his thoughts. The narrator says that Captain Vere is a sea veteran with unconventional habits such as reading biographies of philosophers such as Montaigne. He is described as being a perfectionist and he stood out from his peers because of his habit of reading. The narrator also talks about John Claggart, the ship’s master-at-arms. During that time, a lot of the shipmen hired were criminal suspects as many people were hired in immoral ways during times of war. The narrator suspects that John Claggart might be a criminal himself.
The story shifts back to Billy, who witnesses a novice being beaten up for failing to appear at his post. He decides to do his duties properly in order to avoid a similar treatment. He senses a feeling of threat from the authorities and contacts Dansker, an experienced veteran of the sea. After listening to Billy, Dansker concludes that Claggart does not like Billy. Billy is confused at this statement, as he had not gotten this feeling from Claggart. The following day, Claggart makes a snarky comment when Billy spills some soup on the deck. This ensues laughter from the crew. Billy does not notice Claggart’s scowling face and mistakes this comment as a proof of Claggart’s respect for Billy.
Claggart increasingly begins to resent Billy and believes that the soup spill was not an accident but rather a vengeful act. Claggart’s assistant, Squeak, further enforces this matter and tells him that Billy ridicules him behind his back. On a certain night, a man, who tells him to come to a secluded part of the ship, wakes Billy up. An afterguardsman is present on the balcony and he asks Billy to help out in a possible mutiny. He offers money to Billy. Billy reacts in a fit of stuttering and threatens to throw the man off ship. The man disappears and soon, two forecastlemen appear to locate the source of unrest. Billy tells them that he has handled the matter with appropriate intensity.
After this incident, Billy struggles to comprehend the nature of the man’s purposes and he is both afraid and curious at the same time. He identifies one of the afterguardsmen as the man he had met on that night. The afterguardsman greets him one day and this confuses Billy further. He confesses about this ordeal to Dansker. Dansker has the usual reply and says that Craggart is conspiring against Billy. Billy is greatly taken aback and asks for further explanation but he does not get one. Billy is adamant that Claggart does not have any ill feelings towards him. The narrator comments on how sailors, in general, were relatively trustful and immature and that Billy was not an exception. Claggart still retains his hatred towards Billy but he maintains a civil and good-natured manner in front of Billy. Billy mistakes this treatment as kindness. Billy also fails to understand when the armorer and the captain of the hold start to harbor malicious feelings towards him.
After a close encounter with an enemy frigate, Claggart approaches Captain Vere and informs him about his suspicions about a possible mutiny. Vere is concerned about the way Claggart puts himself forward and asks about the main suspect. Claggart talks about Billy and how his friendly demeanor is a mask that is hiding his true evil nature. Vere is skeptical about Claggart’s intentions and orders someone to bring Billy to the captain’s cabin.
When Billy arrives, Vere asks Claggart to confront him with the accusations. Claggart is very direct about it and this throws Billy off. When Vere tells him to take his time in responding, Billy reacts in a violent way and strikes Claggart, who collapses. They try to help Claggart up but he falls again. Vere dismisses Billy and calls for a surgeon. The surgeon pronounces Claggart as dead and Vere goes into a fit of despair, exclaiming that an angel had brought upon his death but that the angel must be hanged. Vere tells the surgeon to keep the matter a secret but also to inform the lieutenants and the marine captain.
The surgeon is alarmed by Vere’s abrupt decisions but he does not confront him as he is of lower rank. The lieutenants and captains all share the same sentiment: they do not agree with Vere’s prosecution of Billy and they think that an admiral should judge him. A trial is held and Vere recounts the events and supports Billy’s story, denying Claggart’s accusations. Billy states that there was no enmity between him and Claggart. The court asks why Claggart might have felt animosity towards Billy and Vere refuses to provide an answer. Billy is dismissed and the lieutenants ponder upon the statements. Vere argues with the lieutenants about their lack of swiftness. Vere implores them to be authoritative and take a definite decision. The adjudicators decide to convict Billy and they declare him to be hanged.
Vere is the one to disclose to Billy about his sentence and the first lieutenant notices a look of pain on Vere’s face as he leaves the stateroom. Rumors spread like wildfire among the sailors and Vere announces Billy’s execution to the crew. He provides a short explanation and does not elaborate. He orders them to resume their duties. Meanwhile, Claggart’s body is laid to rest at sea. Billy waits for his fate as he is chained with no communication with the world except for with the chaplain. Billy is in a trance; the chaplain and he have a conversation where the chaplain tries to prepare him for death. Billy believes in his innocence and does not fear death. The next day at 4am, Billy is hanged in the main yard, and in his last moments, he yells “God bless Captain Vere!"
The ship’s purser and the surgeon have a discussion about how Billy’s body was abnormally still after he was hanged and how it did not convulse at all. The purser claims that it was a fake death. Whispers echo amongst the sailors but they are urged to return back to their work. Billy is laid to rest and a flock of birds surround the burial spot, a fact that intrigues the crew. The narrator ends the story inconclusively, telling us about Vere’s death during a battle with Athée, a French Battleship. His last words were “Billy Budd, Billy Budd".
A naval chronicle falsely represents Claggart as innocent and Billy as a madman who stabbed Claggart in the heart. While this is the last record of the incident, Billy’s reputation continues to grow. Poems are written about him and many revere his legend. The story ends with the narrator leaving within the shadows, along with Billy Budd.