Foreign Office civil servant Samuel Fennan apparently commits suicide after a routine security check by Circus agent George Smiley. Smiley had interviewed and cleared Fennan only days previously after an anonymous accusation; because of this, Circus head of service Maston sets up Smiley to be blamed for Fennan's death.

While interviewing Fennan's wife Elsa in her home, Smiley answers the telephone, expecting the call to be for him. It is a requested 8:30am call from the telephone exchange. Inspector Mendel, a police officer on the verge of retirement who is investigating the Fennan case, finds out that the call had been requested by Fennan the night before. When Elsa later tells Smiley that she requested the call from the exchange, Smiley becomes suspicious of her. However, Maston unequivocally orders Smiley to refrain from any further investigation into Fennan's death. Back in his office, Smiley receives a letter posted by Fennan the night before, requesting an urgent meeting that day. Believing that Fennan was murdered to prevent the meeting, Smiley resigns from the Circus and attaches his resignation to Fennan's letter, which he forwards to Maston.

Arriving home, Smiley notices a movement in the drawing room. He rings his own door bell and is met by a tall, fair, handsome stranger. Smiley skilfully avoids entering and notes all the number plates of the seven cars parked in the road. Mendel traces one car to a car dealer, Adam Scarr. Scarr tells Mendel that he rents the car out twice a month to a stranger known as 'Blondie', whose description matches Smiley's intruder. Smiley is subsequently attacked and nearly killed while trying to track the car to 'Blondie' and Scarr is later murdered. Investigating further, Mendel learns that Elsa attends a local theatre twice a month with 'Blondie' and that the two exchange music cases at each performance. 'Blondie' is soon identified by fellow Circus agent Peter Guillam as Hans-Dieter Mundt, an East German agent under diplomatic cover working for Dieter Frey, a German spy of Smiley's during the Second World War who has since become an important East German agent. Smiley believes that Frey would use a courier like Mundt to service only one highly placed resident agent. Guillam reports that Mundt has fled England.

When confronted with Smiley's evidence, Elsa confesses to Smiley that her husband was an East German spy, that she was his unwilling accomplice in passing secret documents in the music cases, and that Fennan was killed by Mundt after Frey saw him talking to Smiley. However, Guillam learns that during the last six months, Fennan had been taking home insignificant, unclassified documents. Smiley realises that Elsa herself is the East German spy and that Fennan had accused himself to meet someone with whom he could discuss his suspicions about his wife. Smiley sets a trap, using his knowledge of Frey's tradecraft from the war to inspire a rendezvous between Frey and Elsa. When Frey utilises the meeting to kill Elsa, he is trailed by Mendel and killed by Smiley while attempting to escape.

Smiley turns down Maston's offer of reinstatement and promotion and instead flies to Zurich to see his estranged wife, Ann.