The story begins with the narrator calling "Halloa! Below there! " into a railway cutting. The signalman standing on the line below does not look up, as the narrator expects, but rather turns about and stares into the railway tunnel it is his responsibility to monitor. The narrator calls down again and asks permission to descend. The signalman seems reluctant, but assents and waits with an air of ‘expectation and watchfulness’. The railway cutting is a damp, gloomy and lonely place. The signalman seems still to be in fear of the narrator, who tries to put him at ease.
The signalman appears to have seen the narrator before. The narrator assures him that this is impossible. Reassured, the signalman welcomes the newcomer into his little cabin and the two men speak of the signalman's work. His labour consists of a dull, monotonous routine, but the signalman feels he deserves nothing better, as he misused his youthful academic opportunities. The narrator remarks that the signalman seems a sane and dutiful employee at all times but when he looks to his signal bell at two moments when it is not ringing. The visitor leaves with a promise to return on the following night.
Before he makes his exit, the signalman asks him why he used the words "Halloa! Below! " on his arrival; were they not suggested to him “…in any supernatural way”? The narrator says no. The signalman implores him to by no means call out so again. He says that he is “troubled”. The following day the narrator returns and does not call. The signalman tells him that he will reveal to him the nature of his trouble, which is that he is haunted by a recurring apparition: he has seen a spectre at the entrance to the tunnel on two separate occasions and that each appearance has foreshadowed a tragedy.
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In the first instance, the signalman heard the shouted words that the narrator spoke and saw a figure with its arm across its face, waving the other in desperate warning. He questions it but it vanishes. He then runs into the tunnel but finds nobody. Within a few hours there occurs a terrible train crash with many casualties. On its second appearance, the figure is silent, with both hands before the face in an attitude of mourning. Soon afterward, a beautiful young woman dies in a passing train. Finally the signalman admits that he has seen the spectre several times within the past week.
It seems to the narrator that the signalman is suffering from hallucinations. During the conversation the signalman sees the spectre, and hears his bell toll out a phantom ring, but the narrator sees and hears nothing of these events. The signalman is convinced these supernatural incidents are portents of a third tragic event yet to happen, and is sick with fear and frustration: he does not understand why he should be burdened with knowledge of an incipient tragedy when he, as a lowly railway functionary, has neither the authority nor the ability to prevent it.
The sceptical narrator believes that his new friend's imagination has been overtaxed and suggests taking him to see a doctor. The following day the narrator visits the railway cutting for a third time, and is struck to see a figure at the mouth of the tunnel. This figure is no ghost, however. It is a man, one of a group of officials investigating an incident on the line. The narrator discovers his friend the signalman is dead, having been struck by an oncoming train. He had been standing on the line, looking intently at something, and failed to get out of the way.
The driver of the train explains that he did attempt to warn the signalman of his danger: as the train bore down on the signalman the driver called out to him “Below there! Look out! Look out! For God’s sake, clear the way! ” Moreover, the driver waved his arm in warning even as he covered his face to avoid seeing the train strike the hapless signalman. The narrator notes the significance of the similarity between the driver's actions and the actions of the spectre as the signalman had earlier described them, but leaves the nature of that significance to the reader.
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