The Miserable Mill begins with Sunny, Klaus and Violet Baudelaire traveling with Mr. Poe on a train set off for Paltryville. When they arrive at Paltryville, Mr. Poe departs, and leaves the children to head for their new home, the Lucky Smells Lumbermill. Along the way, the children see a building in the shape of an eye.

Upon arrival, the children learn that they will have to work at the mill, and as part of the deal, Sir, their new guardian, will try to keep Count Olaf, their nemesis, away. They meet Charles, who is Sir's partner, who shows them the library, which contains three books, one about the history of the lumbermill, one about the town constitution, and one donated by Dr. Orwell, the local ophthalmologist, who lives in the eye shaped building.