A young woman named Buttercup (Robin Wright) lives on a farm in the fictional country of Florin. Whenever she gives her farmboy Westley (Cary Elwes) an order, he answers "as you wish" and happily complies. Eventually, she realizes he loves her and admits her love for him. Westley leaves to seek his fortune so they can marry, but his ship is attacked by the Dread Pirate Roberts, who has a reputation for never leaving anyone alive.
Five years later, believing Westley dead, Buttercup reluctantly agrees to marry Prince Humperdinck (Chris Sarandon), heir to the throne of Florin. Before the wedding, she is kidnapped by three outlaws: a Sicilian boss named Vizzini (Wallace Shawn), a Turkish giant that Vizzini discovered in Greenland named Fezzik (André the Giant), and a Spanish master fencer named Inigo Montoya (Mandy Patinkin), who seeks revenge against the six-fingered man who killed his father. The outlaws are pursued by two separate forces: Prince Humperdinck with a complement of soldiers, and a masked man in black. Unbeknownst to Buttercup, Prince Humperdinck actually hired the three outlaws to kidnap her and kill her, leaving her on the shores of Guilder, a rival country, in order to manufacture a war between the two countries.
The man in black catches up to the outlaws at the top of the Cliffs of Insanity, where he first defeats Inigo in a duel before knocking him unconscious. He then defeats Fezzik in hand-to-hand combat by choking him from behind until he blacks out. Finally, he kills Vizzini in a battle of the wits by tricking him into drinking from a poisoned chalice, and so he captures Buttercup. When he tells her he is Roberts, she becomes enraged at him for killing Westley and shoves him into a gorge after telling him that he should die too, but she realizes he is Westley himself when he replies "As you wish!" She dives into the gorge after him, and they flee through the dangerous Fire Swamp where they navigate past the R.O.U.S. (Rodents of Unusual Size), fire spouts, and lightning sand. When they are captured on the other side by Humperdinck and his sadistic six-fingered vizier Count Rugen (Christopher Guest), Buttercup agrees to return with Humperdinck in exchange for Westley's release, but Humperdinck secretly has Rugen imprison and torture Westley.
When Buttercup expresses unhappiness at marrying Humperdinck, he promises to search for Westley, but his real plan is to start a war with the neighboring country of Guilder by killing Buttercup and framing them for her death. After Buttercup realizes that Humperdinck has no intention of finding Westley, she taunts his cowardice and feelings of inferiority towards his romantic rival. Enraged, Humperdinck tortures Westley to his death. Meanwhile, Inigo and Fezzik reunite, and Fezzik informs Inigo of Rugen's existence. Inigo decides that they need the help of the man in black to get into the castle, and when he hears cries of anguish (from Westley being tortured), he decides that they must be from the man in black and follows them. Inigo and Fezzik arrive in Rugen's torture chamber to find Westley dead, but they bring him to a miracle man named Miracle Max (Billy Crystal), who explains that Westley is "only mostly dead," reviving him to a state of heavy paralysis.
Westley, Inigo, and Fezzik invade the castle, prompting Humperdinck to order a drastically abridged version of the wedding ceremony, after which he rushes Buttercup to her chambers and locks her in. Inigo finds and duels with Rugen, and despite incurring heavy blood loss from stab wounds in the opening moments of the battle, he is able to maintain his focus by repeatedly reciting his long-rehearsed greeting of vengeance ("Hello, my name is Inigo Montoya. You killed my father. Prepare to die.") and eventually slays his nemesis. Westley finds Buttercup, who is about to commit suicide, and assures her that her marriage is invalid because she never said "I do." When confronted by Humperdinck, Westley bluffs his way out of a duel (due to his temporary paralysis) and has Humperdinck tied to a chair, left to contemplate his cowardice. Triumphant, he then rides away with Buttercup, Inigo, and Fezzik on four white horses that Fezzik conveniently discovers.
Westley and Buttercup share a passionate kiss. The grandfather then closes the book and prepares to leave, but the boy asks him to read the story again the next day. The grandfather smiles and replies,
"As you wish."