In London at the turn of the century, young widow Lucy Muir tells her late husband's mother Angelica and overbearing sister Eva that she wants to move out of the family home and pursue a life of her own. Together with her daughter Anna and housekeeper, Martha Huggins, Lucy departs for Whitecliff-by-the-Sea. There Lucy calls on Coombe, an estate agent, who reluctantly shows her Gull Cottage, a striking house that is rumored to be haunted by the ghost of its former owner, a sea captain named Daniel Gregg. Lucy insists on renting Gull Cottage, and during her first night in the house, as a fierce storm rages, she speaks to the ghost in the darkness. When it gruffly replies, Lucy lights a candle and gazes in amazement at the handsome captain. Gregg dismisses Coombe's claim that he committed suicide, explaining that he had accidentally kicked the gas heater on while sleeping. Impressed by Lucy's love for the house, Gregg decides to let her stay, and agrees to confine himself to the master bedroom where Anna will not see him. One day, Lucy's in-laws pay an unexpected visit to report that the gold mine that has been providing her modest income has stopped paying dividends, and insist that she return to London with them. Unheard by Eva and Angelica, Gregg tells Lucy that he wants her to stay, and she sweetly bids her relations to "shove off." Gregg then proposes that they repair her finances by collaborating on a book about his life on the sea. In the following weeks, Gregg dictates his "unvarnished" memoirs to Lucy, and the bond between them deepens, leaving her increasingly confused. When the book, Blood and Swash , is finished, Lucy takes the manuscript to the office of publishers Tacket and Sproule, where she attracts the attention of debonair author Miles Fairley. Miles arranges for Lucy to meet Sproule, who reads the bawdy tale in one sitting and happily agrees to publish it. After leaving the office, Lucy shares a cab with the roguish Miles, who tells her that he writes children's books under the pseudonym "Uncle Neddy." One afternoon, Lucy encounters Miles painting near the beach at Whitecliff, and he proclaims his love for her. They begin courting, and although both Gregg and Martha express disdain for Miles, Lucy decides to marry him. Gregg sadly accepts her decision, and after telling the sleeping Lucy that when she wakes, she will believe that their entire relationship has been a dream, he departs. One day, Lucy goes into town to collect a royalty check and impulsively decides to visit Miles. When she arrives at his house, however, she is greeted by Miles's wife, who gently tells her that this sort of thing has happened before. Years pass, and the now grown Anna returns from the university with her beau Bill, a naval officer, and tells her mother they will soon be engaged. Lucy is stunned when Anna tells her she used to talk with Gregg's ghost when she was a child, and admits that she too encountered him in her "dreams." Many years later, the elderly Lucy reads Martha a letter from Anna saying that her daughter, Little Lucy, is engaged to an airplane captain. After Martha leaves the room, Lucy dies. At that moment, Gregg appears and reaches out to Lucy, and her ghost--which resembles Lucy as a beautiful young woman--rises from the old woman's body. Arm in arm, the two spirits leave Gull Cottage and disappear into the fog.