It’s Christmas time at King Arthur’s court, and all the knights and ladies have gathered to celebrate and feast. Arthur, however, refuses to eat until he has witnessed something marvelous or heard a great adventure story. Luckily, just when everyone’s sitting down to eat, a mysterious, gigantic stranger with emerald-green skin and clothing bursts into the hall. As if that weren't weird enough, he's riding a gigantic green horse and carrying an elaborately-decorated axe.
The Green Knight announces that he’s come to test the honor of the legendary knights of the round table, and proposes a game: he will withstand a single axe-blow from the hands of one knight, as long as that knight agrees to meet him in a year and a day to receive an axe-blow in return. Stunned by the total weirdness of his request, no one volunteers.
The Green Knight mocks them cruelly, calling out Arthur himself to take up the challenge. But before Arthur can strike a blow, his nephew, Sir Gawain, declares that it’s shameful for the king to have to participate in such a silly game. So Sir Gawain volunteers himself.
Gawain brings the axe down on the Green Knight, chopping his head off. Instead of dying, the Green Knight picks up his own head, turns it to face the court, and tells Gawain to meet him at the Green Chapel in a year and a day. He gallops out of the hall on his horse as the members of the court try to pick their jaws up off of the floor.
The seasons pass, and soon it’s the holiday season again. Gawain leaves King Arthur's court on All Saint’s Day in search of the Green Chapel. He rides through enchanted lands teeming with marvels, battling monsters, and withstanding extreme cold and snow as he travels. As Christmas approaches, Gawain is relieved to see a huge, well-protected castle in the middle of an enchanted forest. When he arrives there he is warmly welcomed and invited to spend the holidays, enjoying the rich hospitality of the magnificent lord and his beautiful lady.
After the Christmas feasting, Gawain gets ready to leave, but the lord persuades him to stay by saying that he can guide Gawain to the Green Chapel. The lord proposes a game, moreover: as Gawain lounges inside by the fire all day, the lord will ride out to hunt. At the end of the day, the two will exchange whatever they’ve won. Gawain happily agrees to the game, impressed by the lord’s love of merriment and games.
The next morning, as the lord rides out in pursuit of deer, Gawain sleeps in late. He’s awoken by the lady of the castle. She says she's come to enjoy the company of a knight with such a wonderful reputation. They chat for a bit, and then the lady gets up to leave. But before she goes, she surprises Gawain by doubting that he’s really the Gawain she’s heard so much about. When Gawain asks why, she replies that a man with a reputation for being a ladies' man would never depart from a lady without kissing her. Especially when her flirtatious behavior has indicated she’s willing. Taking the hint, Gawain kisses the lady, who then departs.
When the lord returns to the castle that night, he presents Gawain with a multitude of well-dressed deer, for which Gawain exchanges the kiss he’s received from the lord's wife. Gawain and the lord continue the same game for the next two days. The lord hunts a boar and a fox while Gawain flirts with the lady of the castle. Gawain then exchanges the kisses he receives for the animals the lord has killed.
On the last day of the game, however, the lady convinces Gawain to accept something else as a "lover’s token": a green girdle, or belt, which she claims will make the wearer invincible, unable to be killed. Gawain realizes that this is just the thing to save his life during his impending meeting with the Green Knight. When the lord of the castles comes home at the end of the day, Gawain breaks the rules of the game and doesn't exchange the green girdle.
The next morning, Gawain rides out of the castle with a guide, who points him to the Green Chapel. The guide begs Gawain to reconsider, because the man who guards it is so dangerous. When Gawain reaches the clearing, all he sees is a small mound with patches of grass on it. He assumes this must be the chapel. He hears a noise like someone sharpening a blade. He calls out to the sharpener to come meet him.
The Green Knight emerges with his huge axe, and commends Gawain for keeping the terms of the agreement. He moves to strike the first blow, but stops his hand when Gawain flinches. He chews Gawain out for being a sissy. After Gawain promises to flinch no more, the knight moves to strike a second blow, but again stops his hand. This time he claims he was testing to see if Gawain was ready. Finally, the Green Knight strikes a third blow. This time, the axe breaks the skin but doesn't decapitate Gawain. (Whew!) Gawain leaps up and arms himself, telling the Green Knight that he has met the terms of the agreement and will now defend himself if threatened.
Laughing, the Green Knight explains to Gawain that he is actually the same lord of the castle where Gawain spent his holidays. The first two blows, he claims, were in return for the way Gawain returned the kisses of his wife, following the rules of their game as an honest man should. The third blow, he says, was for Gawain’s failure to return the green girdle to him on the last day. But because Gawain’s failing was only because he wanted to save his life, and not because he's just dishonorable, the Green Knight forgives him. He leaves Gawain with only with a scar and a girdle as a reminder of his very human sin.
Sir Gawain, however, is totally mortified. He asks the man’s name and learns that he is Lord Bertilak. His powers come from Morgan le Fay, who is King Arthur’s aunt and a powerful sorceress. She enchanted Bertilak and sent him to King Arthur’s court to test the honor of the knights there and to frighten Queen Guinevere.
Refusing Bertilak’s offer of further hospitality, Gawain returns to Arthur’s court. He tells the story of his adventure, and declares that he will wear the girdle for the rest of his life as a reminder of his failure. The court, however, laughs at Gawain and proposes to all wear a similar girdle for his sake. This tradition is carried down through generations and becomes a symbol of honor.