The Handmaid’s Tale is set in the futuristic Republic of Gilead. Sometime in the future, conservative Christians take control of the United States and establish a dictatorship. Most women in Gilead are infertile after repeated exposure to pesticides, nuclear waste, or leakages from chemical weapons. The few fertile women are taken to camps and trained to be handmaidens, birth-mothers for the upper-class. Infertile lower-class women are sent either to clean up toxic waste or to become "Marthas," house servants. No women in the Republic are permitted to be openly sexual; sex is for reproduction only. The government declares this a feminist improvement on the sexual politics of today when women are seen as sex objects.

The novel focuses on one handmaid, Offred (she is given the name of the man whose children she is expected to bear--she is of Fred). Offred became a handmaid after an attempt to escape with her daughter and husband from Gilead. They fail; her daughter is given away to a needy woman in the upper circles, and Offred does not know whether her husband is alive or dead, whether he escaped or was captured. Offred is in the service of the General and his wife, Serena Joy. Serena Joy hates that she is unable to bear children and hates Offred for taking her husband seed. If Offred does not become pregnant promptly, Serena Joy will undoubtedly take revenge by sending her away, possibily to the toxic colonies.

Offred does not become pregnant, but she does develop an unexpected relationship with the General. He plays games of Scrabble with her (all forms of writing are officially denied handmaids) and gives her gifts of cosmetics and old fashion magazines. One night he dresses her in a cocktail dress and takes her to an illegal nightclub where Offred runs into an old female friend, now a prostitute in the club.

Serena Joy, desperate for children, finally arranges for Offred to sleep with the chauffeur. The two are happy together; she thinks she is pregnant. Soon after, Serena Joy finds the cocktail dress the General gave to Offred. She knows her husband is to blame, but accuses Offred anyway and sends for the police to take her away to certain death. When the van arrives to take her away, however, it is driven by rebels who carry Offred to safety.