The opera opens in a crowded court in a Suffolk fishing village, The Borough. Swallow, the local magistrate, is conducting an inquest into the death of William Spode, Peter Grimes's apprentice, who has died in Grimes's fishing boat.

Grimes goes into the witness box and we hear that he had been trying to get to London with a big haul of fish when he hit bad weather. He and the boy were stuck at sea and the lad had died of thirst. The Court calls the witnesses who saw Grimes return with the dead body and several people come forward. First is Ned Keene, the apothecary, then Auntie, the owner of the pub, Mrs Sedley, a respectable lady, and Ellen Orford, the school mistress.

Crowding the court room are Grimes's neighbours. They clearly dislike Grimes and, though they never bothered with Grimes's apprentice when he was alive, now he is dead, they are out for blood. Grimes realises it will be impossible to tell his side of the tale. Swallow gives his verdict (the boy died accidentally) but adds that Grimes should use a man to help him in future. Grimes immediately picks up the implication that he was to blame after all and protests furiously as everybody leaves. Ellen tries to calm him down, but it takes a long time before his voice can join hers in their duet.

We hear one of the four Sea Interludes. Peter Grimes is punctuated by these Interludes. they are independent orchestral pieces of music and describe the sea in its various moods. This one is called 'Dawn' and we watch as the Borough gets ready for work. Various characters drift in, the Vicar, Bob Boles the Methodist fisherman and a retired sea captain, Balstrode. Grimes's voice is heard off-stage asking for a hand to bring in his boat. No-one moves until Ned Keene and Balstrode catch the rope and haul him in.

Ned tells Grimes he's got a new apprentice for him - he just needs collecting from the Workhouse. He tells Hobson the carrier to get the boy, but Hobson refuses; clearly he doesn't want to bring Grimes another victim. However Ellen steps forward and offers to go with Hobson to fetch the boy; she is greatly respected in the village and Hobson agrees.

Balstrode sees a storm approaching and everybody leaves, except Grimes. Balstrode asks him why he doesn't go somewhere else and start afresh. Grimes says he doesn’t wish to move; he intends to get rich, to buy the good opinion of his neighbours, and marry Ellen. 'Marry her now' says Balstrode, 'No, not till I'm rich,' replies Grimes obstinately - and we begin to sense it will never happen.

The second Sea Interlude interrupts them; the 'Storm'.

The curtain rises on 'The Blue Boar', the local pub. It is past closing time, but customers keep getting blown in. Grimes tumbles in. He has come to collect his apprentice and scarcely notices the people round him as he broods on the stars. His aria is beautiful and desolate "Who can turn the skies back?" he sings, "And begin again...?" The others are not sympathetic, 'He's mad, or drunk!' they mutter, but Balstrode gets them to sing a round and harmony is restored. Ellen and Hobson enter at last with the boy and Grimes hurries him home. The Borough watches the lad hustled off with grim satisfaction, "Home?" they cry, "Do you call that home?"

Act 2 starts with another Interlude, 'Sunday Morning', and we watch the Borough go to church. Ellen sits on the beach with Grimes's silent boy (John) talking to him and listening to the church service going on in the background. She notices a tear in the boy's coat and, as she pulls it off to mend it, she sees his collar was covering a bruise. The boy has been beaten already and Ellen realises that Grimes is incapable of change. At that moment Grimes himself rushes on, he has seen a shoal out at sea and he needs his apprentice to help him bring it in. Ellen confronts him with John’s bruise, and tells him they have no future together; Grimes, bewildered and furious, hits her and exits - dragging the boy after him.

Mrs Sedley has heard the row and, convinced Grimes is thrashing his apprentice, encourages the Borough to go down to his hut and investigate. Hobson starts a sinister beat on his drum and off they all march, leaving the women behind.

The next Interlude is the 'Passacaglia' (a piece of music in which an extended bass line is continually repeated) and is in addition to the Four Interludes; it appears to be describing the suffering of the apprentice. We see him cowering in a corner of Grimes's hut as he struggles into his sea clothes. Grimes storms at him for telling tales but keeps breaking off, he fancies he can see William Spode, the dead apprentice, staring at him through the eyes of the living boy. Then he hears the drum. He ties a rope round the boy and hurries him out of the hut; the child is told to climb down the cliff to the beach while Grimes hangs on to the rope, but a knock at the door distracts him and he drops the rope. We hear the boy scream as he falls down the cliff; Grimes hastily climbs out after him.

The men enter and are taken aback by the quiet and orderliness of the hut. There is a general retreat, but Balstrode stays, he has noticed something on the shore and, as the scene ends, he begins to climb down.

The last act starts with an Interlude called 'Moonlight' and leads straight into a barndance. Mrs Sedley enters, convinced that something has happened to Grimes's apprentice. Nobody listens to her, but she remains brooding on stage. Balstrode and Ellen enter and, unaware they are being overheard, swap notes. Balstrode has seen Grimes's empty boat, while Ellen has found the boy's jersey washed up by the tide. They fear the worst, but decide to give Peter what help they can and leave together. Mrs Sedley steps forward to rouse the village. This time she succeeds and the scene ends with the Borough's terrifying cries of "Grimes! Peter Grimes!" as they prepare to hunt him down.

The last Interlude is followed by the sound of a fog horn and the distant cries of the manhunt. Peter Grimes stumbles in. He has gone mad - fragments of his life come back to him, and he sees his dead apprentices looming out of the mist. Ellen and Balstrode find him roaring his own name at his pursuers and daring them to catch him. Peter's friends are of course quite helpless; the boy's body will come ashore eventually and Grimes will be done for. Balstrode tells him to take his fate into his own hands, to sail out to sea - and scuttle the boat. And Grimes does exactly that. Nobody notices, and dawn breaks as the Borough returns to work. Swallow reports that the coastguard has seen a fishing boat going down out at sea, but everybody agrees that it is too far away to help.

Society, nature, the Sea itself, carry on, massively indifferent to the drowning man and his tragedy.