The narrative of the movie is framed by a scene featuring a boy sick in bed (Fred Savage) and his grandfather (Peter Falk). The plot of the movie is the enactment of the story as it is being read, which is occasionally interrupted by comments from the grandson and grandfather.
A beautiful young woman named Buttercup (Robin Wright) lives on a farm in the fictional country of Florin. She delights in ordering the farm hand Westley (Cary Elwes) to perform chores for her. Westley's only answer is "As you wish." Eventually Buttercup realizes he really means "I love you", and she admits her love for him. Westley soon leaves to seek his fortune so that they can marry. She receives word that Westley's ship was attacked by the Dread Pirate Roberts, who is notorious for leaving no victim alive. Five years later, believing Westley to be dead, Buttercup reluctantly gets engaged to Prince Humperdinck (Chris Sarandon), heir to the throne of Florin.
Before the wedding, Buttercup is kidnapped by a trio of outlaws: a Sicilian criminal genius named Vizzini (Wallace Shawn), a Spanish fencing master named Inigo Montoya (Mandy Patinkin), and a gigantic Turkish wrestler named Fezzik (André the Giant). They are pursued by two parties: one consists of Prince Humperdinck and a number of soldiers; the other, a single masked man in black. The man in black outpaces the royal rescue party and almost catches the outlaws at the Cliffs of Insanity.
Inigo, who is seeking revenge on a man with six fingers on his right hand who killed his father, is left at the top of the cliff to duel the man in black. The two men engage in light banter as they spar with one another, each praising the other as a "decent fellow". In a masterful bout that ranges over a large area, Inigo fights well (and fairly), but is finally defeated. The man in black professes his respect for Inigo as he knocks him unconscious. Vizzini then leaves Fezzik to kill the man in black with his strength, but the man in black is able to choke the giant until he blacks out. The man in black then catches up with Vizzini, who is holding Buttercup hostage, and proposes a battle of wits. Vizzini is tricked into drinking poison, and dies because the Man in Black had actually poisoned both goblets, but he had lived because of an immunity he built up against the poison.
Having captured Buttercup, the man in black says that he is the Dread Pirate Roberts, Westley's murderer. Enraged, Buttercup shoves him into a gorge, yelling "You can die too, for all I care!" only to hear him reply "As you wish!" Realizing that he is actually Westley, she dives into the gorge after him. When they reach the bottom, bruised but alive, Westley tells her that the Dread Pirate Roberts attacked his ship, but made Westley his apprentice after hearing of the depths of his love for Buttercup. Eventually, Roberts secretly retired, passing Westley his name and captaincy. The couple travel through the dreaded Fire Swamp to evade Humperdinck's rescue party, but end up being attacked by several Rodents of Unusual Size (ROUSes), which Westley manages to defeat.
Upon exiting, they are captured by Humperdinck and his menacing six-fingered vizier Count Tyrone Rugen (Christopher Guest). Westley, who had learned of Inigo's quest for revenge against his father's six-fingered assassin during their duel, notices Rugen's six-fingered right hand and tells him, "Someone was looking for you." In response, Rugen knocks him unconscious. Buttercup agrees to return with Humperdinck in exchange for Westley's release, but instead he is brought to Rugen's torture chambers, where he is 'prepared' by an albino (Mel Smith).
When Buttercup expresses unhappiness regarding her pending marriage to Humperdinck, he proposes sending his four fastest ships to locate Westley with the understanding that if they fail, Buttercup ought to marry him. Humperdinck reveals that he himself arranged Buttercup's kidnapping in order to blame the country of Guilder and start a war with them, and that it will even be better propaganda if she is strangled to death on her wedding night.
On the day of the wedding, Inigo learns about Rugen from Fezzik and decides to kill him. Having been impressed with Westley's skill in outmaneuvering them during their previous encounter, Inigo and Fezzik decide that their only chance at penetrating the castle's defenses is by enlisting Westley's assistance. Buttercup learns that Humperdinck never sent the ships, and taunts him with her enduring love for Westley. Enraged, he tortures Westley to death. While searching for Westley (or "the man in black", as they call him), Inigo and Fezzik later find Westley's body and bring it to the local magician Miracle Max (Billy Crystal) and his wife Valerie (Carol Kane), who explain that Westley is only "mostly dead." (If "all dead," revival is impossible). They revive Westley, initially to a state of heavy paralysis, in order to satisfy a grudge against Humperdinck.
Westley, Inigo, and Fezzik invade the castle, and Humperdinck orders the wedding ceremony shortened. Inigo pursues Rugen through the castle. Rugen admits that he killed Inigo's father, and they duel. Although Inigo is injured almost to defeat, his sense of revenge rekindles his energy and he kills Rugen. Westley reaches Buttercup, who has decided to commit suicide, and assures her that her marriage is a sham because in the shortened ceremony she never said "I do." Still partly paralyzed, Westley bluffs his way out of a sword fight with Humperdinck, whom Buttercup then ties to a chair. As the party rides off on four white horses conveniently discovered by Fezzik, Westley offers the role of Dread Pirate Roberts to Inigo who, finding himself suddenly out of the revenge business, needs a new purpose in life.
Upon finishing the story, the grandfather gets up to leave. The grandson—having grown more interested throughout—asks his grandfather to read it to him again the following day. The grandfather replies, "As you wish."
