The story involves a writer named Donald "Don" Wanderley who goes to the town of Milburn in upstate New York after the death of his uncle.

"[3] According to Straub, Stephen King's 1975 novel 'Salem's Lot served as one of the inspirations for writing Ghost Story, saying: "I really wanted to expand things much more than I ever had before.

Eventually, Donald and the girl arrive in Panama City, Florida, at which point the novel jumps back in time to the events of the previous winter.

Living in the small upstate New York town of Milburn (a fictional location which is indicated to be in Broome County east of Binghamton) are four elderly men who are members of a clique called the Chowder Society: John Jaffrey, a doctor; Lewis Benedikt, a retired entrepreneur; Sears James, an attorney; and Ricky Hawthorne, an attorney and James' partner.

One year earlier Jaffrey had thrown a party at his house in honor of a visiting actress named Ann-Veronica Moore, and their fifth member, Edward Wanderley, had died in an upstairs bedroom during the festivities.

One day while repairing a roof Gregory fell off the ladder and was killed, and someone thought they saw the two young Bate children running away from the scene.

Sears tells his friends that in time he began to see a threatening young man hanging around the school, and he eventually came to believe it to be the spirit of Gregory Bate.

Fenny died, and Sears left the small community when he had finished the school year, having satisfied the terms of his contract.

The next morning after telling his story, Sears and Ricky are called out to the farm of one of their clients, who has found some mutilated livestock in his field.

Several years previously Donald's brother David had died under mysterious circumstances, and it led him to write his horror novel.

He had landed a teaching position at Berkeley on the strength of a good reception for his first novel and began seeing a beautiful graduate student named Alma Mobley.

For example, she had a sinister drug-dealing acquaintance named Greg Benton (who was the guardian of a mentally disabled younger brother), even more sinister acquaintances who belonged to a cult associated with the Manson Family, and claimed to be in regular contact with the spirit of a dead man named Tasker Martin who "approved" their relationship.

Not long after this Lewis Benedikt is murdered in the forest, and Sears and Ricky decide that it is time to tell Donald the most terrible story that the Chowder Society knows – and it, too, is a true tale.

Donald has already encountered Anna Mostyn, the young woman claiming to be the niece of Eva Galli, and found she immediately unnerved him, reminding him of Alma.

Donald, Ricky, and Sears are joined in their struggle by Peter Barnes, a young man whose mother was killed by Fenny and Gregory, who revealed to him they were previously normal human beings who were granted new life and powers.

Benjamin Percy recommended the novel: "Peter Straub is a modern-day Henry James, but with sharper teeth and a long black tongue.