Most of the action of Little Dorrit takes place in and around the debtor’s prison, The Marshalsea in London, where William Dorrit has been imprisoned for so long with his family that his daughter Amy, also called Little Dorrit has been born there, and he is called the Father of the Marshalsea himself. Amy has a snobbish sister Fanny, and a brother Edward also called Tip. The novel, however, starts in Marseilles, where in the prison the villain Rigaud tells his fellow-prisoner that he is there for murdering his wife. Also in Marseilles is Arthur Clennam on his way home to London and his mother after he has been in the East with his now dead father for 20 years.
Back in London Arthur Clennam tells his mother that he has a feeling that his father has been guilty of dishonesty in business. She will not hear of it. Arthur meets his old passion Flora Finching, but she is now middle-aged, fat and silly, and she talks incessantly. Arthur also meets Little Dorrit, whom his mother employs. Arthur does not realize that Little Dorrit is falling in love with him, yet he does show some interest in her and tries to help her and her family. Among other things he investigates William Dorrit’s debt at the exceedingly inefficient Circumlocution Office. There, however, he meets Daniel Doyce, an inventor and engineer and Arthur Clennam becomes his partner. Later with the help of Pancks the rent-collector he discovers that William Dorrit is the heir to a fortune, and the Dorrits can leave the Marshalsea, and they - except Little - Dorrit becomes arrogant and deceited. Arthur Clennam himself, however, is ruined due to an unfortunate speculation in the fraudulent banker Merdle’s financial empire. Merdle commits suicide, and Arthur Clennam is imprisoned in the Marshalsea. In the debtor's prison Arthur Clennam sickens, but Little Dorrit nurses him back to life, and he is released from prison through the help of Daniel Doyce. After Little Dorrit’s fortune is lost too, also through Merdle, she and Arthur marry.
It appears that the old Mrs. Clennam is not Arthur’s mother, and that it is she that has suppressed the will that benefitted the Dorrits. This subplot involves Rigaud, who has come from Marseilles to London, and Mrs. Clennam old servant and also business partner Jeremiah Flintwich and his weak wife Affery.