When the eccentric hobbit Bilbo Baggins leaves his home in the Shire, he gives his greatest treasure to his heir Frodo: a magic ring that makes its wearer invisible. Because of the difficulty Bilbo has in giving the ring away, his friend the wizard Gandalf the Grey suspects that the ring is more than it appears. Some years later, Gandalf reveals to Frodo that the ring is in fact the One Ring, forged by Sauron the Dark Lord thousands of years before to enable him to dominate and enslave all of Middle-earth. Gandalf tells Frodo that the Ring must be destroyed to defeat Sauron's evil, but he also warns him that the Enemy has learned of the Ring's whereabouts from the creature Gollum and will seek to find it and kill its bearer. Despite the danger and hopelessness of the quest, Frodo accepts the burden and resolves to take the Ring to the safety of the elven stronghold of Rivendell.
Frodo sets off with three companions, fellow hobbits Merry, Pippin, and Sam. After a series of close calls and misadventures, where they are saved only by the timely intervention of the mysterious Tom Bombadil, they reach the town of Bree. The innkeeper delivers a letter from Gandalf recommending a weather-beaten Ranger known as Strider as their guide to the elves. Strider leads them cross-country, hoping to avoid the Black Riders who are watching the Road, but they are attacked near the ancient watchtower of Weathertop. Frodo puts on the Ring, revealing himself to the Black Riders. Their leader stabs him with a blade of evil enchantment, and he nearly dies as they race for Rivendell. The Nine Riders try to force Frodo's surrender, but a flood destroys their horses even as Frodo collapses into unconsciousness.
Frodo wakes in Rivendell, where the wise Elrond has worked his healing magic to save the hobbit. Frodo discovers that Bilbo, now grown very old, lives with the elves, and they reunite happily. Soon Elrond calls a council of the representatives of elves, men, and dwarves to respond to the growing darkness in the world. The council reviews the history of the Ring from its forging to the recent discovery that Frodo's ring is the One. Although Boromir, the representative of Gondor, the greatest kingdom of men, argues that the Ring should be used as a weapon against the Enemy, the Council resolves to destroy it. Someone must throw the Ring into the fires of Mount Doom, where it was first created, deep in Mordor, Sauron's country. Frodo accepts the task of carrying the Ring to Mordor, and a company is selected to help him on the quest: the wizard Gandalf; the men Boromir and Aragorn (known to Frodo as Strider but in fact the true king of Gondor); Legolas the elf; Gimli the dwarf; and Frodo's own hobbit kin, Merry, Pippin, and Sam. They are called the Fellowship of the Ring.
The company considers several paths through the mountains, but the ways are all watched. Even if they did not have Sauron to fear, Saruman the White, once the wisest of the wizards, has allied himself with the Enemy and seeks the Ring for himself. When they attempt to cross the pass of Caradhras, an unnatural snowstorm nearly buries them, and they are forced to turn back. Finally, they resolve to brave the perilous dwarven Mines of Moria, now overrun by orcs and even darker things. Within Moria, Gollum begins following them. When the nine have nearly found their way out, they are attacked by orcs and a Balrog, a terrible demon. Gandalf holds it back so that the party can escape, but then he falls with it into the abyss.
Devastated by the loss of Gandalf, the Fellowship flees to the elven wood of Lothlórien. Lady Galadriel shelters them for a while and offers wise counsel. Frodo offers the Ring to Galadriel, but she resists the temptation. When the Fellowship leaves, she gives them boats to continue their journey down the river Anduin as well as more powerful gifts. Orcs attack them while traveling downriver, and they feel the presence of a winged Black Rider overhead, but they make it to the lawn of Parth Galen unharmed. There, they must decide whether to turn for Mordor and Mount Doom or to go to Minas Tirith, Boromir's home in Gondor. Boromir tries to force the issue by seizing the Ring from Frodo, but the hobbit escapes. Frodo resolves to set out alone for Mordor, reluctantly accepting Sam's steadfast refusal to stay behind.