In the year AD 3017, humanity is slowly recovering from an interstellar civil war that tore apart the first Empire of Man. The Second Empire is busy establishing control over the remnants of its predecessor, by force if necessary. After a rebellion on the planet New Chicago is quashed, Captain Bruno Cziller of the Imperial battlecruiser INSS MacArthur remains behind as Chief of Staff to the new governor, while Commander Roderick Blaine is given temporary command of the ship, along with secret orders to take Horace Hussein Bury, a powerful interstellar merchant suspected of instigating the revolt, to the Imperial capital, Sparta. Another passenger is Lady Sandra Bright "Sally" Fowler, the niece of an Imperial senator and a traumatized former prisoner of the rebels.

New Caledonia is the capital of the Trans-Coalsack sector, on the opposite side of the Coalsack Nebula from Earth. Also in the sector is a red supergiant star known as Murcheson's Eye. Associated with it is a yellow Sun-like star, which from New Caledonia appears in front of the Eye. Since some see the Eye and the Coalsack as the face of God, the yellow star is known as the Mote in God's Eye.

Human ships use the Alderson Drive, which allows them to travel instantaneously between "Alderson points" in specific star systems. Approaching New Caledonia, MacArthur is ordered to investigate when an alien spacecraft, propelled by a solar sail, is detected. After the spacecraft fires upon MacArthur, Blaine has its main capsule detached from the sail and taken aboard. Its sole occupant, a brown and white furred creature, is found dead.

After much debate, MacArthur and the battleship Lenin are sent to the star from which the alien ship came, the Mote. MacArthur carries civilian researchers to make first contact with the aliens, or "Moties" as they are quickly nicknamed. Admiral Kutuzov, aboard Lenin, has strict orders to avoid all contact with the aliens and ensure that human technology does not fall into their hands. The Moties seem friendly and have advanced technology that they are willing to trade, much to Bury's delight. Although they also possess the Alderson Drive, none of their ships have ever returned. This is because, unknown to the Moties, the Mote's only Alderson exit point lies within the outer layers of the star Murcheson's Eye. Human warships can survive there for a limited time because of their protective Langston Fields, which the Moties do not have.

The Moties are an old species, native to a planet that the humans label Mote Prime, that has evolved into many specialized subspecies. The first taken aboard MacArthur is an "Engineer", possessing amazing technical abilities, but limited speech and free will. It brings along a pair of tiny "Watchmakers" as helpers. Some days later, a delegation of "Mediators" (like the dead pilot of the probe ship) arrive. Their specialty is communication and negotiation. The Mediators invite the humans to send a party to Mote Prime. After some debate, the invitation is accepted. Each person in this group acquires a "Fyunch(click)", a Mediator who studies their human subject and tries to learn how to think like them.

Back on MacArthur, the Watchmakers escape, and although it is assumed they have died, they have actually been breeding furiously out of sight. Undetected by the crew, they modify parts of MacArthur to suit their needs. When they are discovered, several attempts to rid MacArthur of the infestation fail, and a battle for control of the ship erupts. The crew is eventually forced to abandon ship after suffering casualties. The party on Mote Prime is quickly recalled without explanation and told to rendezvous with Lenin. Once MacArthur is evacuated, Lenin fires on her to prevent the potential capture of human technology. This reveals that the Watchmakers have improved MacArthur's Langston Field. Nevertheless, MacArthur is destroyed.

During the evacuation, MacArthur midshipmen Staley, Whitbread and Potter are cut off and forced to escape in Watchmaker-modified lifeboats. The lifeboats automatically land in a sparsely populated area of Mote Prime. There the midshipmen find a fortified museum. It provides evidence of a very long and violent history, though the Moties had carefully portrayed themselves as completely peaceful. Following this discovery, the midshipmen are tracked down by Whitbread's Mediator Fyunch(click), who reveals that Moties (other than the short-lived, sterile Mediators) must become pregnant periodically or die. This inevitably results in overpopulation ... and civilization-ending wars. The Masters, whom the Mediators obey, have also concealed the existence of one Motie subspecies from the humans: Warriors more deadly than any human, even Sauron supersoldiers.

The museums exist to help restore civilization after a collapse. The "Cycles" of civilization, war, and collapse have gone on for hundreds of thousands of years, leaving the Moties fatalistically resigned to their destiny. Only a mythical character called "Crazy Eddie" believes there is a way to change this, and any Motie who comes to believe a solution is possible is labeled a "Crazy Eddie" and deemed insane.

The current civilization utilizes a type of industrial feudalism, with coalitions of Masters governing the planet. One faction, led by "King Peter", wanted to reveal the truth to the humans, but was overruled. Colonization of other planets would inexorably bring about conflict with humans, as the inevitable Motie population explosion would force them to seek to take over human worlds. Nonetheless, the more powerful coalition sees this temporary solution as preferable to the impending collapse. Both factions send Warriors after the midshipmen, one to capture them, the other to rescue them. The stronger group's Warriors trap the midshipmen, but the trio refuse to surrender and die as a result.

Unaware of the midshipmen's fate, Lenin leaves the Mote system, taking with it three ambassadors, a sterile Master and two Mediators, whose mission is to open the galaxy to their species while concealing their terrible secrets.

An Imperial Commission is on the verge of granting colonies to the Moties, but MacArthur Sailing Master/Lieutenant Kevin Renner figures out the truth just in time. It is the passengers on the original probe, ejected into space and burned up by solar radiation, that give the game away. Not only is there a Warrior among the group, but several are visibly pregnant, demolishing any argument about them being statues or religious icons.

The decision is made to gather a battle fleet to either disarm or try to annihilate the Moties. The ambassadors are faced with the extinction of their species, knowing that the Masters would never submit. However, a Mediator comes up with a third option: a blockade of the system's only Alderson exit point. This plan is adopted, over the strenuous opposition of Bury, who views the Moties as the greatest threat humanity has ever faced.