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Lizzie Greystock, a fortune-hunter who ensnares the sickly, dissipated Sir Florian Eustace, is soon left a very wealthy widow and mother. While clever and beautiful, Lizzie has several character flaws; the greatest of these is an almost pathological delight in lying, even when it cannot benefit her. Before he dies, the disillusioned Sir Florian discovers all this, but does not think to change the generous terms of his will.
The diamonds of the book's title are a necklace, a Eustace family heirloom that Sir Florian gave to Lizzie to wear. Lizzie attempts to hold onto them, much to the irritation of the longtime family lawyer, Mr Camperdown. The Eustaces find themselves in an awkward position. On the one hand, the diamonds are a valuable heirloom to which Lizzie may not have a legal claim, but on the other, they do not want to antagonize the mother of the heir to the family estate (Lizzie having only a life interest).
Meanwhile, after a respectable period of mourning, Lizzie searches for another husband, and "the plot thickens".