Four generations after the Norman conquest of the island, the tensions between Saxons and Normans are at a peak; the two peoples even refuse to speak one another's languages. King Richard is in an Austrian prison after having been captured on his way home from the Crusades; his avaricious brother, Prince John, sits on the throne, and under his reign the Norman nobles have begun routinely abusing their power. Saxon lands are capriciously repossessed, and many Saxon landowners are made into serfs. These practices have enraged the Saxon nobility, particularly the fiery Cedric of Rotherwood. Cedric is so loyal to the Saxon cause that he has disinherited his son Ivanhoe for following King Richard to war. Additionally, Ivanhoe fell in love with Cedric's high-born ward Rowena, whom Cedric intends to marry to Athelstane, a descendent of a long-dead Saxon king. Cedric hopes that the union will reawaken the Saxon royal line.
Unbeknownst to his father, Ivanhoe has recently returned to England disguised as a religious pilgrim. Assuming a new disguise as the Disinherited Knight, he fights in the great tournament at Ashby-de-la-Zouche. Here, with the help of a mysterious Black Knight, he vanquishes his great enemy, the Templar Brian de Bois-Guilbert, and wins the tournament. He names Rowena the Queen of Love and Beauty, and reveals his identity to the crowd. But he is badly wounded and collapses on the field. In the meantime, the wicked Prince John has heard a rumor that Richard is free from his Austrian prison. He and his advisors, Waldemar Fitzurse, Maurice de Bracy, and Reginald Front-de-Boeuf, begin plotting how to stop Richard from returning to power in England.
John has a scheme to marry Rowena to de Bracy; unable to wait, de Bracy kidnaps Cedric's party on its way home from the tournament, imprisoning the Saxons in Front-de-Boeuf's castle of Torquilstone. With the party are Cedric, Rowena, and Athelstane, as well as Isaac and Rebecca, a Jewish father and daughter who have been tending to Ivanhoe after his injury, and Ivanhoe himself.