Daniel Deronda contains two main strains of plot, united by the title character. The novel begins in mid-story in late August 1865 with the meeting of Daniel Deronda and Gwendolen Harleth in the fictional town of Leubronn, Germany. Daniel finds himself attracted to, but wary of, the beautiful, stubborn, and selfish Gwendolen, whom he sees lose all her winnings in a game of roulette. The next day, Gwendolen receives a letter from her mother telling her that the family is financially ruined and asking her to come home. In despair at losing all her money, Gwendolen pawns a necklace and debates gambling again in order to make her fortune. In a fateful moment, however, her necklace is returned to her by a porter, and she realizes that Daniel saw her pawn the necklace and redeemed it for her. From this point, the plot breaks off into two separate flashbacks, one which gives us the history of Gwendolen Harleth and one of Daniel Deronda.
In October 1864,[ soon after the death of Gwendolen's stepfather, Gwendolen and her family move to a new neighborhood. It is here that she meets Henleigh Mallinger Grandcourt, a taciturn and calculating man, who proposes marriage shortly after their first meeting. At first open to his advances, she eventually flees (to the German town in which she meets Deronda) upon discovering that he has several children with his mistress, Lydia Glasher. This portion of the novel sets Gwendolen up as a haughty, selfish, yet affectionate daughter, admired for her beauty but suspected by many in society because of her satirical observations and somewhat manipulative behavior. She is also prone to fits of terror that shake her otherwise calm and controlling exterior.
Deronda has been raised by a wealthy gentleman, Sir Hugo Mallinger. Deronda's relationship to Sir Hugo is ambiguous and it is widely believed, even by Deronda, that he is Sir Hugo's illegitimate son, though no one is certain. Deronda is an intelligent, light-hearted and compassionate young man who cannot quite decide what to do with his life, and this is a sore point between him and Sir Hugo, who wants him to go into politics. One day in late July 1864, as he is boating on the Thames, Deronda rescues a young Jewish woman, Mirah Lapidoth, from attempting to drown herself. He takes her to the home of friends of his, and it is discovered that Mirah is a singer. She has come to London to search for her mother and brother after running away from her father, who kidnapped her when she was a child and forced her into an acting troupe. She ran away from him finally because she feared he was planning to sell her into an immoral relationship with a friend of his. Moved by her tale, Deronda undertakes to help her look for her mother (who turns out to have died years earlier) and brother and through this, he is introduced to London's Jewish community. Mirah and Daniel grow closer and Daniel, anxious about his growing affection for her, leaves for a short time to join Sir Hugo in Leubronn, where he and Gwendolen first meet.
From here, the story picks up in "real time," and Gwendolen returns from Germany in early September 1865 because her family has lost its fortune in an economic downturn. Gwendolen, having an antipathy to marriage, the only respectable way in which a woman could achieve financial security, attempts to avoid working as a governess by pursuing a career in singing or on the stage, but a prominent musician tells her she does not have the talent. In order to save herself and her family from relative poverty, she marries the wealthy Grandcourt, whom she believes she can manipulate to maintain her freedom to do what she likes, despite having promised Mrs. Glasher she would not marry him and fearing that it is a mistake.

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