Thomas Fowler is a British journalist in his fifties who has been covering the French war in Vietnam for over two years. He meets a young American idealist named Alden Pyle, who lives his life and forms his opinions based on the books written by York Harding, who writes books on foreign policy, with no real experience in matters of Southeast Asia at all. Harding's theory is that neither Communism or colonialism are the answer in foreign lands like Vietnam, but rather a "Third Force" — usually a combination of traditions — works best. When Pyle and Fowler first meet, Pyle says he would be delighted if Fowler could help him understand more about the country. Fowler is much older, more realistic and more cynical.
Fowler has a live-in lover, Phuong, who is only 20 years old and was previously a dancer at The Arc-en-Ciel (Rainbow) on Jaccareo Road, in Cholon. Her sister's intent is to arrange a marriage for Phuong that will benefit herself and her family. The sister disapproves of their relationship, as Fowler is already married and an atheist. So, at a dinner with Fowler and Phuong, Pyle meets her sister, who immediately starts questioning Pyle about his viability for marriage with Phuong. Towards the end of the dinner, Pyle dances with Phuong, and Fowler notes how poorly he dances.
Fowler goes to Phat Diem to cover a battle there. Pyle travels there to tell him that he has been in love with Phuong since the first night he saw her, and that he wants to marry her. They make a toast to nothing and Pyle leaves the next day. Fowler gets a letter from Pyle thanking him for being so nice. The letter annoys Fowler because of Pyle's arrogant confidence that Phuong will leave Fowler to marry him. Meanwhile, Fowler's editor wants him to transfer back to England.
Pyle comes to Fowler's residence and they ask Phuong to choose between them. She chooses Fowler, unaware that he is up for a transfer. Fowler writes to his wife to ask for a divorce in front of Phuong.