Little Nell Trent lives alone with her aged grandfather, who runs an old curiosity shop. The grandfather, Little Nell's mother's father, has two obsessions. One is keeping Little Nell away from her brother, Fred, a drunken profligate. The other is a burning desire to gamble. Hoping to provide a fortune for the little girl, the old man gambles away every penny he can get. Not content with using the income of the curiosity shop, the old man borrows money recklessly.

One of the old man's creditors is an ugly, misshapen, cruel dwarf named Quilp. The husband of a pretty but browbeaten young woman, Quilp plots to ruin the old man and someday marry Little Nell, who is only fourteen years old. Having discovered the old man's passion for gambling by forcing his wife to spy on Little Nell, Quilp is soon able to take over the old curiosity shop by due process of law. Little Nell and her grandfather leave during the night and start an aimless journey from London to western England.

Almost penniless, the old man and the little girl find many friends on their way. For a time, they travel with a Punch-and-Judy troupe, until the girl becomes alarmed at the habits of the men connected with the show and persuades her grandfather to leave them. She and the old man are next befriended by Mrs. Jarley, owner of a waxworks, but the grandfather's passion for gambling causes them to leave their benefactor. At last a schoolmaster, on his way to fill a new post, takes them under his wing.