Tipping the Velvet opens in the reign of Edward VII, as Nan King looks back over her life in the early 1890s.

Brought up in a Whitstable oyster parlour, Nan Astley is 18 when she first sees Kitty Butler, a male impersonator (or masher), perform on the stage of the Canterbury Palace of Varieties. Having fallen instantly in love with Kitty, Nan is thrilled to be invited to become Kitty's dresser and move with her to London. During their first year together, the girls' relationship becomes physical and passionate, and Nan (under the stage name Nan King) joins Kitty on the music hall stage as a male impersonator. But Nan's happiness is shattered when she discovers Kitty in bed with the girls' manager and mentor, Walter Bliss. 

Devastated and heartbroken, Nan runs away from her life in the music halls to live alone in sordid lodgings. She sets herself up as a male prostitute (or renter), making use of the costumes from her previous life as an impersonator. Whilst working as a renter, Nan is picked up by wealthy lesbian Diana Lethaby, who installs her in her luxurious St. John's Wood home as her live-in 'tart'. Initially, Nan throws herself wholeheartedly into the glamorous lifestyle and sado-masochistic fantasies of Diana and her sapphic friends from the Cavendish Ladies' Club. Eventually, however, she rebels against her subservient role, is chucked out by Diana, and finds herself once more destitute and alone on the streets of London. 

Struggling to find a means of survival, Nan recalls a previous encounter with a woman called Florence, a socialist and supporter of women's rights, who runs a hostel for women in distress. Nan seeks her out in the East End of London, and manages to inveigle her way into her private home, which she shares with her brother Ralph and an orphaned baby whom brother and sister are raising together. Gradually, Nan is drawn into a world of social activism and trade unionism. Over time, too, she comes to realise that she has strong feelings for Florence, and that these feelings are reciprocated.

The story ends with Nan coming to Ralph's aid when he falters in his speech at a socialist rally. At the same rally, she sees Kitty again, as well as Diana, her former mistress. Rejecting Kitty's bid to renew their relationship, and resolutely consigning her life with Diana to the past, Nan realises that with Florence she has at last found the emotional fulfilment and security she has long been seeking.