Inventive Violet Baudelaire, her intelligent younger brother Klaus, and their sharp-toothed, precocious baby sister Sunny are orphaned when a mysterious fire destroys their parents' mansion. Mr. Poe, in charge of the Baudelaire estate, entrusts them to their "closest relative," the obnoxious Count Olaf, who is only interested in the money Violet will inherit when she turns 18. He loses custody of the children after unsuccessfully attempting to kill them in a train accident.
Poe then sends the Baudelaires to live with their uncle, Dr. Montgomery Montgomery, a cheerfully eccentric herpetologist. Planning a trip with the children to Peru, their stay with Uncle Monty is cut short when Olaf appears in disguise as a man named Stephano, who murders Monty and frames a large and poisonous viper for the killing. As the disguised Olaf prepares to spirit the children away, Sunny reveals the snake's true gentle nature, and Olaf's plot is exposed. Poe accepts Olaf's guilt, though not his true identity. Olaf abandons his disguise and escapes.
The orphans are then sent to live in Lake Lachrymose, where their Aunt Josephine resides in a house perched precariously on the edge of a cliff overlooking the waters of the vast lake. She has numerous irrational fears, and yet lives in a house populated with many of those things of which she is terrified by - her fear of realtors prevents her from moving. A room of photographs and documents apparently contains clues to the cause of the fire that killed the orphans' parents. However, Olaf arrives once again, disguised as a sailor named Captain Sham, and quickly gains Josephine's confidence. A hurricane comes to Lake Lachrymose, and Olaf regains custody of the children after rescuing them and leaving Josephine to be eaten alive by deadly leeches.
Olaf concocts his final plan involving a play starring himself and Violet. In the play, his character marries Violet's character, but in such a way that the staged marriage is legal, gaining him access to her inheritance. This move is accomplished by Olaf's casting of Justice Strauss, as the supposed judge in the play; with her in this role, the marriage is technically legal. To ensure Violet's co-operation, he holds Sunny hostage. However, Klaus succeeds by incinerating Olaf's marriage certificate when he triumphantly climbs to a nearby tower, using the same light-focusing apparatus that Olaf used to set fire to the Baudelaire mansion. Olaf is arrested, but subsequently escapes. At the ruins of the Baudelaires mansion, the three orphans find a letter left to them by their parents before the Baudelaires became orphans, which contains words of hope and encouragement. The envelope also contains a spyglass, one of several that Klaus signifies to imply the presence of a secret society his parents and relatives belonged. The orphans are then sent to new "fortunate" guardians.