The Merchant of Venice opens on a street in Venice, where Antonio, a Venetian merchant, complains of a sadness he can't quite explain. His friends suggest they'd be sad too if they had as much merchandise to worry about as Antonio. Apparently all of his money is tied up in various sea ventures to exotic locales. But Antonio is certain it's not money that's bothering him.
Antonio's friend Bassanio enters the scene, and we learn that Bassanio has been at the forefront of Antonio's mind. Apparently Bassanio just got back from a secret trip to see an heiress named Portia in Belmont. Bassanio financed his trip (and in fact, his entire lifestyle) by borrowing tons of money from Antonio. Portia is beautiful, intelligent, and, most important, rich. If Bassanio could only get together the appearance of some wealth, he would be in a good position to compete with all the other guys vying for Portia's attention. If they marry, he's all set financially. Antonio would be happy to lend Bassanio the money he needs to woo Portia, except, as we know, all of Antonio's money is at sea. The two friends part ways, agreeing that they'll try to raise the funds on Antonio's credit around town.
Meanwhile, even rich heiresses have their troubles. Portia is plagued by suitors from the four corners of the earth but isn't allowed to choose the one she wants. Instead, her father, before his death, devised an unusual test. Three caskets – one gold, one silver, and one lead – are laid out before each suitor, and whoever picks the right one gets the girl. Portia complains about all of the important men who come to see her, as there's something wrong with each of them.
As Portia is trying to figure out how to avoid marrying, Bassanio is trying to figure out how to marry her. He negotiates with the Jewish moneylender, Shylock, asking for 3,000 gold coins (ducats). Bassanio borrows the money on his friend Antonio's credit. Trouble is, Antonio is an anti-Semite (he is prejudiced against Jewish people) and is offensive to Shylock whenever he has the chance. Slyly, Shylock says he'll try out Antonio's method of business by lending him the money interest-free. BUT, this is on the condition that Antonio signs a bond promising that if the debt goes unpaid, Antonio will give Shylock a pound of his own flesh. This seems like a good idea at the time, as Antonio is sure he'll have earned the money from his ships before Shylock's due date.
Before we have time to think about what a crazy idea it is to promise anyone a pound of your flesh, we're back at Belmont learning the rules of the casket game. Choose wrong, and not only do you fail to get Portia, but you cannot marry anyone for the rest of your life. We see suitors fail when they choose the wrong caskets.
Meanwhile, Jessica (Shylock's only child) tells us that living in Shylock's house is pure hell and that she's ashamed to be his daughter. She has decided to elope with Lorenzo and convert to Christianity. Jessica gets her chance to carry out her rebellious scheme when her dad leaves the house to go to have dinner. As soon as he is out the door, Jessica steals off with her lover, Lorenzo, and helps herself to a chunk of Dad's cash.
Bassanio and some of his pals set off for Belmont in hopes that Bassanio will snag the beautiful and rich Portia.
We also learn from some gossipy cats in Venice that Shylock was livid when he learned his daughter ran away, screaming "'My daughter! O my ducats! O my daughter! / Fled with a Christian! O my Christian ducats!" (2.8.2). This is good news for Antonio, who hates Shylock. But Antonio doesn't stay happy for long, as he is too busy recovering from the fact that Bassanio has gone off to woo Portia.
Back in gossipy Venice, we hear that Antonio's ships have been sinking left and right. Shylock shows up, still mad about his daughter's rebellion, but he's excited to hear that he'll get to take a pound of flesh from his enemy Antonio. He explains to the gossipy men that he hates Antonio because Antonio hates him for being Jewish. Shylock then gives a beautiful speech in defense of the humanity of Jews, including the well-known lines, "if you prick us, do we not bleed?" He concludes that a Jew is not unlike a Christian, and a Christian in this situation would seek revenge. Therefore, he will do the same, because the Christians have taught him hatred with their cruelty. Shylock is further angered to hear reports that his daughter is off lavishly spending his money, so he sets up arrangements to have Antonio jailed, cut, and killed.
Back in Belmont, Portia is batting off the men. But she is truly excited by Bassanio. Bassanio impressively chooses the lead casket (correct) and wins Portia and her wealth. Portia is falling all over herself with love for Bassanio when Lorenzo and Jessica arrive with news that Antonio is about to die at Shylock's command. Portia offers to pay off Antonio's debt, and she and Bassanio have a quick (as in shotgun-quick) wedding before she sends Bassanio back to Venice with 20 times the debt owed to Shylock. Portia gives Bassanio a ring and makes him promise never to take it off, which we're sure is going to be significant sometime soon.
Meanwhile, Portia has hatched a plan to cross-dress and pose as a lawyer to argue Antonio's defense at his trial. She tells Lorenzo to look after her house, disguises herself and Nerissa as men, and sets off for Venice in a hurry. Also, Graziano randomly marries Nerissa.
The scene moves to the court in Venice. Everyone has tried to plead with Shylock, but he won't hear reason. He wants justice, and that means having a pound of Antonio's flesh, as promised. It seems there's no hope until a young, effeminate-looking man shows up who happens to be a learned lawyer. He is called Balthazar (a.k.a. Portia).
Portia (as Balthazar) then begins to argue that Shylock should have mercy on Antonio, as mercy is a higher order good than justice. Shylock says he doesn't need mercy, he's fine with just justice, thank you very much. There's no way anyone can get around it – Antonio signed the bond, the Duke won't bend the rules, and Shylock won't relent. Antonio doesn't care if he dies. Bassanio says he wishes he could trade his wife and his life for Antonio's, which does not please his wife, but she doesn't say anything because she's disguised in drag.
Portia (as Balthazar) gets Antonio ready to go under the knife, but she stops just short as Shylock is sharpening his knife. She says the bond entitles Shylock to a pound of flesh, but if he spills a drop of Christian blood, then he'll be guilty of plotting to murder a Venetian Christian, the penalty for which is losing everything he has. Shylock says something like, "Fine, just give me the three-times-the-debt cash you offered me earlier," and Portia replies, "Actually, that offer's not on the table anymore." Then he says, "OK, just give me the 3,000 back," and she returns, "Actually, that's not on the table either."
The slippery downward slope continues until Shylock declares that, fine, he'll just leave, and Portia stops him and says since he conspired to kill a Venetian he actually has to forfeit everything he owns. And beg for his life.
Finally holding the upper hand, Antonio decides that as punishment, Shylock has to sign an agreement saying that when he dies, all his money will go to Jessica and her new Christian husband. Also, Shylock must convert to Christianity. Shylock leaves a broken man.
Portia grabs Nerissa and tries to get home before the men return and find out their wives were the ones in court that day. Antonio and Bassanio try to get Balthazar to accept a gift before he goes, and though Portia (as Balthazar) tries to refuse it, the men press her. She asks for Bassanio's ring (which is really her ring, symbolizing their marriage trust). Bassanio refuses to give it to her, but then Antonio suggests he's whipped and foolish, so Bassanio caves in and gives Balthazar the ring at the last minute.
Finally everyone gets home to Belmont; the women have narrowly arrived before the men. Nerissa launches into a fight with Graziano about the missing ring (as it turns out, she too gave a ring symbolizing marital fidelity), accusing him of giving it to a woman. Portia then lights into Bassanio for the same thing. Portia complains about the men breaking faith for this lawyer guy, and she pledges to sleep with this learned man too, breaking her marriage vows like Bassanio did by giving up her ring.
Antonio has come home to Belmont with them and he feels responsible for the fights. To make up for it he promises his soul as a guarantee that Bassanio will be faithful to Portia. Portia accepts the offer of Antonio's soul and she gives him a ring to give to Bassanio. Turns out it's the original ring. Portia explains that she and Nerissa were the young lawyer and the clerk who rescued Antonio from Shylock. Also, she's got a letter that says some of Antonio's ships have come home with cash after all. The play ends with happiness for most of the characters in the play – all except Shylock.