The story begins on Christmas Eve. Arthur Kipps is with his wife Esme and her children. They encourage him to join them in the tradition of telling ghost stories. He is upset by his memories and decides he needs to exorcise them by writing it down.
The young Arthur Kipps, a junior solicitor, is sent by Mr Bentley, his employer at a firm of lawyers, to sort the estate of Mrs Alice Drablow. He is told to attend her funeral and bring back all her documents from Eel Marsh House where she lived.
On the train to Crythin Gifford, Arthur meets Samuel Daily, a local landowner, who comments that Arthur will be one of the only people at Mrs Drablow's funeral. This turns out to be the case - apart from Arthur Kipps, only Mr Jerome, Mrs Drablow's agent, attends. However, Arthur sees a sickly-looking woman dressed in black at the church and again at the graveyard. When he mentions her later to Mr Jerome, the agent is visibly upset, but denies having seen a woman.