An elderly gentleman of La Mancha has ruined his wits by devouring books of knight-errantry until he can no longer tell romance from history. He resolves to revive chivalry himself: he furbishes up rusty armour, renames his broken-down horse Rocinante, dubs himself Don Quixote, and fixes on a neighbouring farm-girl as Dulcinea del Toboso, the lady in whose name he will perform his deeds. So equipped, he rides out in search of wrongs to right.
After a first short sally he recruits a labouring neighbour, Sancho Panza, as his squire, tempting him with the governorship of an island. Their adventures follow one pattern with endless variations: Quixote reads the chivalric meaning into a scene, charges, and is beaten or mocked, while Sancho protests that the giants are windmills and the armies are flocks of sheep. When the facts refuse the romance, Quixote blames hostile enchanters who, he insists, transform reality to rob him of glory.
The two are at cross purposes with the world and often with each other, yet bound together. Quixote is learned, courteous, and genuinely brave; his madness is narrow, touching only chivalry, so that between misadventures he speaks with sense and dignity. Sancho is shrewd, greedy, loyal, and full of proverbs. The book lets neither man simply win the argument: the dreamer's nobility and the realist's good sense both keep their force.
In the second part the characters have become aware that a book about their earlier exploits is in circulation, and others begin staging elaborate deceptions to amuse themselves at the pair's expense. Sancho is at last made governor of a mock island, Barataria, and rules it with unexpected shrewdness and honesty before giving it up. The mockery grows colder, and the question of who is really the fool sharpens as the jokers reveal their own cruelty.
Defeated in combat by a disguised neighbour and bound to give up arms, Quixote turns homeward broken in spirit. On his deathbed his reason returns; he abjures the books of chivalry, declares himself once more Alonso Quixano the Good, makes his will, and dies. Those who had laughed mourn him, and the novel ends having held comedy and sorrow, illusion and disenchantment, together to the last.