A turning point in the story occurs when Ichabod becomes enamored of one Katrina Van Tassel, the daughter and only child of a wealthy farmer named Baltus Van Tassel, who pays little attention to his daughter other than to be proud of her merits when they are praised. On accounts both of her beauty and her father's wealth, which he is eager to inherit, Ichabod begins to court Katrina, who responds in kind. This attracts the attention of the town rowdy, Abraham "Brom Bones" van Brunt, who also wants to marry Katrina and is challenged in this only by Ichabod. Despite Brom's efforts to humiliate or punish the schoolmaster, Ichabod remains steadfast, and neither contestant seems able to gain any advantage throughout this rivalry.
Later, both men are invited to a harvest festival party at Van Tassel's where Ichabod's social skills far outshine Brom's. After the party breaks up, Ichabod remains behind for "a tête-à-tête with the heiress", where it is supposed that he makes a proposal of marriage to Katrina but, according to the narrator, "Something, however ... must have gone wrong, for he certainly sallied forth, after no very great interval, with an air quite desolate and chapfallen", meaning that his proposal is refused, allegedly because her sole purpose in courting him was either to test or to increase Brom's desire for her. Therefore Ichabod leaves the house "with the air of one who had been sacking a henroost, rather than a fair lady's heart."
During his journey home, Ichabod encounters another traveler, who is eventually revealed to be the legendary Headless Horseman; the ghost of a Hessian soldier who was decapitated by a cannonball during the American Revolutionary War. Ichabod flees, eventually crossing a bridge near the Dutch burial ground. Because the ghost is incapable of crossing this bridge, Ichabod assumes that he is safe. However, the Hessian throws his own severed head at Ichabod, knocking him from the back of his own horse and onto the road. The next morning, Ichabod's hat is found abandoned, and close beside it a shattered pumpkin. Ichabod is never seen in Sleepy Hollow again, and is therefore presumed to have been spirited away by the Headless Horseman. Later, "an old farmer, who had been down to New York on a visit several years after, and from whom this account of the ghostly adventure was received" suggests that Ichabod had been frightened, both of the Horseman and of the anger of his (Ichabod's) current landlord, into leaving the town forever, later to become "a justice of the ten pound court" in "a distant part of the country." Katrina marries Brom, who is said "to look exceedingly knowing whenever the story of Ichabod was related, and always laughed heartily at the mention of the pumpkin", which events "led some to suspect that he knew more about the matter than he chose to tell"; therefore, that he himself was the Horseman, of whose legend he took advantage so as to dispose of his rival.
Caleb Stegall suggests that "the most distinctive characteristic Irving gives Ichabod is that of a psalm singer," and that Ichabod Crane is the "most celebrated Covenanter in all of literature.
