The fishermen of a small New England fishing village gather at the local tavern, and comment on a passing two-master whose captain is clearly inexperienced. Abner Suggs, a local fortune-telling, lays out the cards and predicts that it will sink. The town doctor, Nichols, asks if Suggs if he ever sees anything but disaster, and the fortuneteller says that he only tells them what he sees. The town's elder fisherman, Captain Lindeman, stumps in and buys a drink, and then complains about his day of pitting himself against the unmerciful sea. When Suggs offers to read his fortune and see if he can predict a brighter future, Lindeman says that he has enough misery in his day without having to listen to Suggs, and slaps him to the floor. Nichols goes to the fortunteller's aid and Lindemann warns that anyone who gets in his way will feel the back of his hand. Suggs says that Lindemann has no heart and can't love. The captain responds by saying that there's nothing in their lives to love except the sea, and it will eventually kill them all.
When Lindemann returns to his trawler, he discovers his crew standing around the net containing the day's catch. He examines what they've found and discovers a living mermaid caught in the fishing net. Lindemann prepares to throw it into the sea, insisting that it's a monster, but the townspeople arrive and Nichols suggests they cut it loose. The captain says that it's his catch to do with what he wants, and he'll decide its faith. The mermaid reaches out to the captain, taking his hand, and after a stunned moment he pulls his hand free. Lindemann's crew suggests that they put it on display for money, and the tavern owner offers to buy it from the captain and pay him a share of his proceedings. Lindemann says that he'll think about it and tells everyone to leave him alone. Once they shuffle away, Lindemann stops the mermaid from slipping over the side, and says that since the sea gave her to him, he'll decide her ultimate fate.
Three days later, Lindemann's crew sit around, since their captain hasn't put to sea since they found the mermaid. When they ask Lindemann what he's done with the mermaid, he tells them to wait until he gives them orders and returns to his cabin. Nichols arrives in response to Lindemann's summons, and the crew warns him that they have no idea what their captain has done with the mermaid. The doctor boards the trawler and Lindemann awkwardly invites him to share a drink. Nichols asks Lindemann about the mermaid, reminding him about Bennett's offer, and the captain angrily says that he wouldn't wish to put it on display for gawkers. He then tells the doctor that the mermaid is sick and asks Nichols to treat it. Lindemann says that he has learned to communicate with it, though not with words, and takes the doctor to the hold to see it. The mermaid is wasting away, unable to breathe, and Nichols says that he can't treat it. What it needs is to be returned to sea. Lindemann refuses, saying that that he can't live without it, but Nichols warns that monster or woman, it's no fit comrade for a man.
Nichols returns to the tavern and confirms that the mermaid is still alive but dying. Suggs accuses Lindemann of keeping it alive to torture it, but Nichols explains that after a lifetime alone, Lindemann has finally found someone to love. The crew suggests that they try and take it from Lindemann by force, but Nichols warns that if they do, Lindemann will kill anyone who sets foot on his boat.
Later, Suggs goes to Lindemann's boat, where the captain is gathering water to put on the mermaid. The fortuneteller says that he was right about the sinking ship, but says that he wants to help. He offers Lindemann a potion that will give the mermaid a human form and let her live on land. Lindemann warns that if he's lying, he'll break his arm, but Suggs insists that he's telling the truth. If Lindemann administers the potion now, the mermaid will gain human form in five hours at sunrise. Relieved, Lindemann tells Suggs that he'll bless him if he's telling the truth, and takes the potion to the mermaid.
Come sunrise, Lindemann checks on his mermaid and discovers that it has human legs. Running to the deck, he calls to everyone to gather to see the woman that is now hers. The crew stares at the mermaid as she climbs up at the hold, and Lindemann realizes that they are looking in horror. Turning he discovers that the mermaid now has a human body... and the head of a fish. She dives into the water. Screaming for her to come back, Lindemann dives in after her and sinks without a trace.
Later, the townspeople hold a brief service for Lindemann and throw a wreath into the waters. As Nichols leaves, Suggs offers to predict his future in return for a drink.