The story takes place in Jakarta during the last year of Sukarno's presidency. Despite the near collapse of the Indonesian economy, President Sukarno continues to spend money on massive projects and mobilize the nation against foreign imperialists, especially the United States and Britain. The Great Leader has pronounced this "the Year of Living Dangerously."

The main protagonists of the novel are several foreign newsmen, in particular, Hamilton, a newly arrived representative of the Australian Broadcasting Service, and Billy Kwan, a free-lance cameraman, also from Australia. Billy is an achondroplastic dwarf, an intense man whose secret fantasy life includes a belief that dwarfs form a separate race.

Billy's onetime hero, Sukarno, has now led Indonesia to the brink of revolution. Billy befriends Hamilton, to whom he also attributes heroic qualities, and the two become inseparable for a while. However, both Hamilton and Sukarno prove that they have clay feet. Hamilton does this by co-opting Billy's fantasy girlfriend. In the climactic last weeks before the Indonesian coup d'etat, Billy is radicalized and decides to take direct action. Realizing that his course of action may be fatal, Billy tries to publicize Sukarno's misuse of power by unfurling an anti-Sukarno banner from a government building in Jakarta. He is killed in the attempt.