Billy Budd is a seaman impressed into service aboard HMS Bellipotent in the year 1797, when the Royal Navy was reeling from two major mutinies and was threatened by the Revolutionary French Republic's military ambitions. He is impressed to this large warship from another, smaller, merchant ship, The Rights of Man.

Billy, a foundling from Bristol, has innocence, good looks and a natural charisma that make him popular with the crew. His only physical defect is a stutter which grows worse when under intense emotion. He arouses the antagonism of the ship's master-at-arms, John Claggart. Claggart, while not unattractive, seems somehow "defective or abnormal in the constitution", possessing a "natural depravity." Envy is Claggart's explicitly stated emotion toward Budd, foremost because of his "significant personal beauty," and also for his innocence and general popularity. This leads Claggart to falsely charge Billy with conspiracy to mutiny. When the captain, Edward Fairfax "Starry" Vere, is presented with Claggart's charges, he summons Claggart and Billy to his cabin for a private meeting. Claggart makes his case and Billy, astounded, is unable to respond, due to his stutter. In his extreme frustration he strikes out at Claggart, killing him instantly. Despite Billy's moral innocence, he must face a trial.