The book is a frame narrative primarily depicting a fictional island society.

More travels to Antwerp as an ambassador for England and King Henry VIII. While not engaged in his official duties, More spends time conversing about intellectual matters with his friend, Peter Giles. One day, More sees Giles speaking to a bearded man whom More assumes to be a ship's captain. Giles soon introduces More to this new man, Raphael Hythloday, who turns out to be a philosopher and world traveler. The three men retire to Giles's house for supper and conversation, and Hythloday begins to speak about his travels.

Hythloday has been on many voyages with the noted explorer Amerigo Vespucci, traveling to the New World, south of the Equator, through Asia, and eventually landing on the island of Utopia. He describes the societies through which he travels with such insight that Giles and More become convinced that Hythloday would make a terrific counselor to a king. Hythloday refuses even to consider such a notion. A disagreement follows, in which the three discuss Hythloday's reasons for his position. To make his point, Hythloday describes a dinner he once shared in England with Cardinal Morton and a number of others. During this dinner, Hythloday proposed alternatives to the many evil civil practices of England, such as the policy of capital punishment for the crime of theft. His proposals meet with derision, until they are given legitimate thought by the Cardinal, at which point they meet with great general approval. Hythloday uses this story to show how pointless it is to counsel a king when the king can always expect his other counselors to agree with his own beliefs or policies. Hythloday then goes on to make his point through a number of other examples, finally noting that no matter how good a proposed policy is, it will always look insane to a person used to a different way of seeing the world. Hythloday points out that the policies of the Utopians are clearly superior to those of Europeans, yet adds that Europeans would see as ludicrous the all-important Utopian policy of common property. More and Giles do disagree with the notion that common property is superior to private property, and the three agree that Hythloday should describe the Utopian society in more detail. First, however, they break for lunch.