Throughout the novel Manfred follows each evil desire, leading to the destruction of his lineage. He behaves purely instinctively to protect his ownership over the castle. But Manfred is not the true ruler of Otranto, and he cannot understand or see the signs he is given that indicate he should step aside and let the true ruler of the castle—Theodore—be reinstated. Manfred attempts to divorce his wife Hippolita and marry Isabella, who is like a daughter to him. His rage, abuse of authority, and jealousy lead him to murder his own daughter, though he believes Matilda to be Isabella when he commits the crime. Even deeper in the throes of evil, Manfred keeps his ancestor's crime a secret and continues to reap the benefits of the crime, which leads ultimately to the complete destruction of all he holds dear.
Isabella, who is an orphan at the outset of the novel, though one of high birth, is a loyal, dutiful, and levelheaded princess. Though she does not particularly love Conrad, she is willing to marry him and be brought formally into the family—consisting of Manfred, Hippolita, and Matilda—who have helped raise her and treated her as a daughter and sister. When Conrad is killed on their wedding day, before they are married, and her would-be father-in-law, only hours later, declares that he wants to divorce his wife Hippolita, who cannot bear any more children, and marry Isabella, she appropriately understands all of the emotional ramifications of such a morally grotesque marriage and runs away. Throughout the novel Isabella displays a strong moral compass and emotional responses that align with a pious and loving nature. Even in the end, when she marries Theodore, whom she had loved but already sacrificed for her sisterly friend Matilda, she does so with a sense of loyalty and unselfishness.
Matilda, a Virgin Mary figure in the novel, is extremely pious and wants to join a convent rather than be married. She is devoted to her mother's happiness and well-being and entirely aware that in her father's eyes, she is essentially worthless because she is female. However, Matilda still loves her father and seeks to be a good daughter as best she can. Much to Matilda's surprise, she falls in love with Theodore. However, she is willing to obey her mother and father and give up Theodore to marry Frederic, Marquis of Vicenza. This decision saves her family's lineage and the proprietorship of Otranto and proves to be part of her undoing, which she acknowledges after her father fatally wounds her with a dagger meant for Isabella. On her deathbed, Matilda's response to being mortally wounded—forgiving her father for slaying her—unleashes goodness in Manfred in the end. Metaphysically, it helps to bring to light all of the darkness Manfred has been aiding and abetting and works in accord with the supernatural elements in the novel, and it helps resolve the plot.
Hippolita strictly adheres to the prevalent medieval convention that her husband is her ruler, like the divine right of kings, and knows what is best for her. As a result, she is a conflicted character throughout the novel because her husband's morality, if it were ever good, goes haywire immediately after their son Conrad is murdered. Every virtuous instinct Hippolita has is subsumed by Manfred's lust, jealousy, and desire for power, which, in turn, causes Hippolita to be an accomplice in bringing destruction on the house of Otranto, including her son and daughter. Hippolita is an unheroic character with a heart of gold. Not being cut out to stand up for what is right, it is the other characters' moral strength that ultimately redeems her, and her husband too.
Theodore, a peasant without family, money, or nobility when the novel begins, is an innocent bystander whom Manfred falsely accuses of using magic to murder Manfred's son, Conrad. However, Theodore's character embodies the idea that the pure of heart will be protected, and throughout every trial he faces, his conviction is proved true—although not without much struggle, damage, and sacrifice. Theodore's convictions, however, do not bring him to a fairytale happy ending, but rather to acquiescence to Providence. Theodore, about to be executed, stumbles into finding his long-lost father. Imprisoned, he finds his true love, Matilda. He appears blessed and marked for greatness. However, he almost kills an innocent man, Frederic, Marquis of Vicenza, by mistaking an ally for an enemy, and he loses his true love. He also does not feel a connection with his biological father once having found him, all elements that complicate his character. In the end Theodore is unmasked and freed to be his true self, and what is rightfully his is restored to him. However, what was most important to him, true love, is lost forever.
As both a friar and, secretly, Count of Falconara, Father Jerome straddles worldliness and adherence to his medieval religious beliefs, which causes much conflict and moral flip-flopping for the character. When confronted with moral choices, Father Jerome concedes to give up Isabella to save Theodore—something Theodore's character would not permit if given the choice—and, though he is the Otranto's royal family's spiritual counselor, he knows the secret crime lurking underneath their power and harbors a desire for "sacred vengeance." Although this seems to align with Providence within the novel's moral parameters—"a tyrant's race must be swept from the earth to the third and fourth generation," in Father Jerome's own words—Theodore's character contradicts the friar's perspective in this and at many crossroads in the narrative. But Father Jerome is no villain. For the most part, he guides the other characters to make good choices, appeals to the good side of Manfred's nature, and contends with Manfred's outrageous passions when no one else will.
Frederic, Marquis of Vicenza, is guided by Providence, through a dream he has while captured in the Holy Land (ancient Palestine) during the Crusades, to the abode of a dying hermit, who, also by Providence, has a message for Frederic. The message comes in the form of a prophecy written on a supernaturally giant sabre, giving advice on how Frederic can save his daughter and right the wrong done to Frederic's ancestor, Alfonso the Good, who was poisoned and murdered by Manfred's grandfather. Once he arrives at the Castle of Otranto, to fulfill his holy mission, Frederic lets his lust for Manfred's daughter, Matilda, cloud his purpose, and he almost sacrifices his daughter Isabella in marriage to the very tyrant whose ancestor wronged Frederic's. However, a frightening apparition of the hermit from Joppa brings Frederic back to his moral senses.