Antonio, a Venetian merchant, complains of melancholy; his friend Bassanio asks for a loan to travel to Belmont to court the beautiful heiress, Portia. Antonio agrees, but says that he must borrow the money from one of the city's moneylenders because all of his ships are at sea. At Belmont, Portia is also melancholy because, according to the terms of her father's will, she must marry the man who chooses the casket (out of a choice of gold, silver or lead) containing her portrait. If he chooses wrongly, he is condemned to remain unmarried forever. Antonio approaches Shylock, a Jewish moneylender, to ask for a loan. Shylock hates Antonio and tricks him into promising to forfeit a pound of flesh if he cannot pay in time.

Shylock's daughter Jessica elopes with the Christian gentleman Lorenzo. Bassanio, accompanied by friend Gratiano, departs for Belmont. The Prince of Morocco comes to Belmont and chooses the wrong casket; meanwhile, in Venice, rumors swirl that Antonio's ships have been lost at sea. The Prince of Arragon also chooses the wrong casket, and then Bassanio arrives at Portia's house. He and Portia fall in love, and he makes the correct choice (the lead casket), but their happiness (and that of Gratiano, who will marry Portia's lady-in-waiting, Nerissa) is interrupted by news that Antonio has lost all his money and failed to pay the debt, and Shylock is demanding his pound of flesh. In Venice, Antonio is taunted by Shylock, who refuses to listen to reason.

Portia disguises herself as a man and secretly follows Bassanio to Venice. The Duke of Venice presides over the trial. When Shylock refuses to accept Bassanio's offer to repay the loan, the Duke announces that he has called on a legal expert to settle the matter. A letter arrives from the expert, saying that he has sent one of his brightest pupils to pass judgment -- the pupil is Portia, who arrives dressed as a young lawyer. She reads the contract, and declares that Shylock is entitled to the flesh.

The moneylender praises her, but Portia then adds that the contract says nothing about shedding blood, so Shylock must cut the flesh without making Antonio bleed or else be arrested for shedding a Christian's blood. Shylock angrily retreats and says that he will take Bassanio's money, but Portia denies him even this, declaring that he has conspired against a Venetian citizen's life and thus his own life is forfeit. However, the court shows mercy -- Shylock keeps half his wealth, but must convert to Christianity. Not knowing that 'he' is his wife, Bassanio is induced to give the 'young lawyer' a ring that Portia gave to him.

Gratiano gives Nerissa (Portia's 'clerk') a ring that she gave to him, and the two women return to Belmont. When the men get back, they are accused of having given the rings to women. Eventually, however, Portia reveals the deception, news arrives that some of Antonio's ships have been recovered, and the company celebrates happily.