Regeneration begins with Siegfried Sassoon's open letter, dated July 1917, protesting the conduct and insincerities of the First World War. The letter has been published in the London Times and has received much attention in England, as many people are upset over the length and toll of the war thus far. The army is not sure what to do with Sassoon, as his letter clearly threatens to undermine the strength of the war effort at home.
With the string-pulling and guidance of Robert Graves, a fellow poet and friend of Sassoon, the Board agrees to send Sassoon to Craiglockhart War Hospital—a mental facility in Scotland—rather than court-marshaling him. Sassoon is at first hesitant to agree to this, since he (rightly) fears that being committed to a mental hospital will undermine his cause; however, convinced by Graves that there is no other option, Sassoon agrees.
At Craiglockhart, Sassoon meets with Dr. W.H.R. Rivers, a former anthropologist turned psychiatrist who encourages his patients to express their war memories so that they can heal their "nerves." Though Rivers can sympathize with the strong dislike of the horrors of war, he believes it is his duty to encourage Sassoon to return to France to fight.
There are many soldiers with various problems and ailments in the hospital. Burns, an emaciated man, has been unable to eat since a shell threw him into the gas-filled stomach of a German corpse. Anderson, a former war surgeon, is now terrified at the sight of blood, and is worried about resuming his civilian medical practice. Prior, a young, stubborn, and slightly difficult patient, enters the hospital suffering from mutism. Rivers meets with each of them in turn, helping them to recover from their problems.
One stormy night, Burns leaves the hospital, makes a trip far into the countryside, and comes across a tree with dead animals hanging from it. He is at first frightened, but he then starts removing the animals from the branches one by one and arranging them in a circle. Burns lies down in the middle of the circle, naked, and he feels soothed. Eventually, Burns returns to the hospital, but no one finds out about this episode.
Dr. Rivers is personally and emotionally tied to the welfare of his patients. One night, he has a nightmare about old nerve regeneration experiments he used to conduct with his old friend, Henry Head. At Cambridge, the two had severed a nerve in Head's hand with the purpose of charting its gradual regeneration. Rivers still feels guilty about the pain he inflicted on his friend, as well as the pain he inflicts on his patients by forcing them to talk about their war experiences.
Sassoon's letter is read in the House of Commons and is dismissed, as he is considered mentally unstable. Though Sassoon expected this result, he is still saddened and disappointed by the news. Slowly, he begins to become friends with another patient in the hospital, Wilfred Owen. Owen is also a poet and he greatly respects Sassoon's work; Sassoon agrees to help Owen with his poetry.
Prior, who has regained his voice, finds his way to a pub in Edinburgh where he meets a young munitions worker named Sarah Lumb. They strike up an acquaintance and agree to see each other again. When Prior returns to the hospital, Rivers tries hypnosis on Prior to see if it enables him to remember the tragic events that led to his breakdown. The hypnosis works, and Prior remembers in vivid detail having to shovel his men's remains after they were killed by a shell. Prior's memories anger and upset him. The next week, Prior takes Sarah to a seaside town where they see crowds of people walking on the beach. Prior envies and resents the way these people can just escape from the war. A storm comes, and Prior and Sarah make love under the shelter of a thornbush.
After a very busy day, Rivers wakes up in the middle of the night with chest pain; his doctor insists that he take three weeks vacation. During these three weeks, he visits his brother's house and reflects on his relationship with his deceased father. Rivers then visits his old friend Henry Head, who offers him a terrific job at a war hospital in London. Finally Rivers visits Burns's house in Suffolk for a few days. The Review Board has given Burns an unconditional discharge from the army. While at Suffolk, Burns has an episode and tries to commit suicide by hiding in a hole that floods at high tide. Rivers finds Burns, however, and saves him.
Back at Craiglockhart, the Board has granted Prior permanent home service; he will not have to return to the war. Prior sneaks into Sarah's room and tells her the news. Though they are both skeptical about love, they agree to give their relationship a try. Meanwhile, Sassoon has also come to a very important decision. Although he still disagrees with the brutality and suffering of the war, he decides to return to France in order to care for his men. Both Graves and Rivers are pleased with this decision.
Dr. Rivers decides to take the job in London, and leaves Craiglockhart in glory (Willard, one of his patients, has overcome his mental block and is now able to walk again). In London, Rivers is fascinated by his new work. Dr. Yealland, another psychiatrist specializing in war patients, invites Rivers to the National Hospital to come on his rounds. Rivers watches one of Yealland's horrific electro-shock therapy sessions on a patient named Callan. That night, Rivers has a nightmare that he is shoving a horse's bit into Sassoon's mouth, similar to the way Yealland shoved the electrode into the patient's mouth.
Rivers returns to Craiglockhart for a monthly Review Board meeting. The Board grants Anderson a desk position in the War Office and discharges Sassoon to duty, to return to France to fight. As Rivers says farewell to Sassoon, he realizes how much his own views about the war have changed.