Tom Canty, the youngest son of a very poor family living in Offal Court located in London, has been abused by his father and grandmother, but is encouraged by the local priest, who taught him to read and write. Loitering around the palace gates one day, he sees Edward Tudor, the Prince of Wales. Coming too close in his intense excitement, Tom is caught and nearly beaten by the Royal Guards. However, Edward stops them and invites Tom into his palace chamber. There, the two boys get to know one another and are fascinated by each other's life. They have an uncanny resemblance to each other and learn they were even born on the same day, so they decide to swap clothes “temporarily". The Prince hides an item, which the reader later learns is the Great Seal of England, then goes outside to confront the guards who abused Tom; however, dressed as Tom, he is not recognized by the guards, who drive him from the palace. 
Tom, dressed as Edward, tries to cope with court customs and manners after being mistaken for the prince. Edward’s father King Henry VIII, his fellow nobles and the palace staff think the prince has an illness that has caused memory loss, and fear he will go mad. 
The Prince eventually finds his way through the streets to the Canty home, where the Canty family believe him to be Tom. There, he is subjected to the brutality of Tom's alcoholic and abusive father, from whom he manages to escape, and meets Miles Hendon, a soldier and nobleman returning from war. Although Miles does not believe Edward's claims to royalty, he humors him and becomes his protector. Meanwhile, news reaches them that King Henry has died and Edward - actually Tom - is now the king. 
As King, Tom is repeatedly asked about the missing Great Seal of England, but he knows nothing about it. However, when Tom is asked to sit in on judgments, his common-sense observations reassure them his mind is sound. 
As Edward experiences the brutal life of a London pauper firsthand, he becomes aware of the stark class inequality in England. In particular he sees the harsh, punitive nature of the English judicial system under which people are burned at the stake, pilloried and flogged. He realizes that the accused are convicted on flimsy evidence and branded or hanged for petty offences, and vows to reign with mercy when he regains his rightful place. When Edward declares to a gang of thieves that he is the king and will put an end to unjust laws, they assume he is insane and hold a mock coronation. 
After a series of adventures, including a stint in prison, Edward interrupts the coronation as Tom is about to be made king. The nobles are shocked at their resemblance but refuse to believe that Edward is the rightful king wearing Tom's clothes until he produces the Great Seal of England that he hid before leaving the palace. 
Edward and Tom switch back to their original places and Edward is crowned King Edward VI of England. Miles is rewarded with the rank of earl and the family right to sit in the king's presence. In gratitude for supporting the new king's claim to the throne, Edward names Tom the "King's Ward", a privileged position that he holds for the rest of his life. 
The ending explains that although Edward died at the age of 15, he reigned mercifully due to his experiences, while Tom lived to be a very old man.