The film unfolds through eight compelling chapters, starting in 1933 with Grace and her father, following the devastation of Dogville from the previous installment. Traveling in a convoy alongside a group of gunmen, they make a brief stop at a plantation named Manderlay in rural Alabama. The scene is set when a black woman approaches the group, expressing distress over a forthcoming punishment for theft—a stolen bottle of wine.
Upon entering the plantation, Grace is shocked to discover that slavery is still an unfortunate reality, persisting approximately 70 years after the American Civil War and the Emancipation Proclamation. Disgusted by this revelation, Grace decides to remain on the plantation with a few of the gunmen and her father's lawyer, Joseph, to ensure the safe transition of the enslaved individuals to freedom. Soon after their arrival, the plantation's matriarch, Mam, passes away, leaving behind a chilling request for Grace: to burn a notebook referred to as "Mam's Law," which details the exhaustive regulations governing the lives of everyone at the plantation, both free and enslaved.
As Grace delves into the contents of "Mam's Law," she learns about the seven divisions of slaves at Manderlay, each identified by a Roman numeral and standing in a designated area on a "parade ground." This book imposes strict rules, including prohibiting the use of cash by the enslaved. Fueled by indignation, Grace takes on the challenge of managing the plantation, vowing to punish the oppressors and prepare the enslaved for their newfound freedom.
Determined to ensure that the former slaves avoid further exploitation, Grace instructs Joseph to create contracts for all the inhabitants of Manderlay, implementing a cooperative living arrangement where the white family works the land as laborers while the black community assumes ownership of the plantation and its resources. Throughout her efforts, Grace passionately advocates for freedom and democracy, articulating principles of racial equality that many contemporary Americans had yet to accept.
However, as the story unfolds, Grace finds herself grappling with the challenges of instilling her ideals into the fabric of Manderlay's society. Her well-intentioned actions often lead to unforeseen consequences, such as utilizing the timber from surrounding trees, which ultimately exposes the crops to dust storms. After enduring a year of struggle, the community finally manages to harvest and sell their cotton, marking a temporary success in Grace's mission. Nonetheless, her involvement takes a troubling turn when she engages in an unsatisfactory relationship with one of the ex-slaves, who subsequently squanders their cotton profits through theft and gambling.
Realizing she has not achieved her objectives, Grace reaches out to her father to leave Manderlay, but her departure is suddenly obstructed by the community's members. The shocking truth emerges that "Mam's Law" was neither crafted nor enforced by Mam or her fellow whites but was instead a creation of Wilhelm, the eldest member of the community. He designed it to uphold the existing order following abolition, safeguarding the black inhabitants from a hostile outside world. In typical fashion for von Trier's narratives, the idealistic protagonist finds herself at odds with the stark realities she encounters in Manderlay.
