Isabel Archer is a woman in her early twenties who comes from a genteel family in Albany, New York, in the late 1860s. Her mother died when she was a young girl, and her father raised her in a haphazard manner, allowing her to educate herself and encouraging her independence. As a result, the adult Isabel is widely read, imaginative, confident in her own mind, and slightly narcissistic; she has the reputation in Albany for being a formidable intellect, and as a result she often seems intimidating to men. She has had few suitors, but one of them is Caspar Goodwood, the powerful, charismatic son of a wealthy Boston mill owner. Isabel is drawn to Caspar, but her commitment to her independence makes her fear him as well, for she feels that to marry him would be to sacrifice her freedom.
Shortly after Isabel's father dies, she receives a visit from her indomitable aunt, Mrs. Touchett, an American who lives in Europe. Mrs. Touchett offers to take Isabel on a trip to Europe, and Isabel eagerly agrees, telling Caspar that she cannot tell him whether she wishes to marry him until she has had at least a year to travel in Europe with her aunt. Isabel and Mrs. Touchett leave for England, where Mrs. Touchett's estranged husband is a powerful banker. Isabel makes a strong impression on everyone at Mr. Touchett's county manor of Gardencourt: her cousin Ralph, slowly dying of a lung disorder, becomes deeply devoted to her, and the Touchetts' aristocratic neighbor Lord Warburton falls in love with her. Warburton proposes, but Isabel declines; though she fears that she is passing up a great social opportunity by not marrying Warburton, she still believes that marriage would damage her treasured independence. As a result, she pledges to accomplish something wonderful with her life, something that will justify her decision to reject Warburton.
Isabel's friend Henrietta Stackpole, an American journalist, believes that Europe is changing Isabel, slowly eroding her American values and replacing them with romantic idealism. Henrietta comes to Gardencourt and secretly arranges for Caspar Goodwood to meet Isabel in London. Goodwood again presses Isabel to marry him; this time, she tells him she needs at least two years before she can answer him, and she promises him nothing. She is thrilled to have exercised her independence so forcefully. Mr. Touchett's health declines, and Ralph convinces him that when he dies, he should leave half his wealth to Isabel: this will protect her independence and ensure that she will never have to marry for money. Mr. Touchett agrees shortly before he dies. Isabel is left with a large fortune for the first time in her life. Her inheritance piques the interest of Madame Merle, Mrs. Touchett's polished, elegant friend; Madame Merle begins to lavish attention on Isabel, and the two women become close friends.
Isabel travels to Florence with Mrs. Touchett and Madame Merle; Merle introduces Isabel to a man named Gilbert Osmond, a man of no social standing or wealth, but whom Merle describes as one of the finest gentlemen in Europe, wholly devoted to art and aesthetics. Osmond's daughter Pansy is being brought up in a convent; his wife is dead. In secret, Osmond and Merle have a mysterious relationship; Merle is attempting to manipulate Isabel into marrying Osmond so that he will have access to her fortune. Osmond is pleased to marry Isabel, not only for her money, but also because she makes a fine addition to his collection of art objects.
Everyone in Isabel's world disapproves of Osmond, especially Ralph, but Isabel chooses to marry him anyway. She has a child the year after they are married, but the boy dies six months after he is born. Three years into their marriage, Isabel and Osmond have come to despise one another; they live with Pansy in a palazzo in Rome, where Osmond treats Isabel as barely a member of the family: to him, she is a social hostess and a source of wealth, and he is annoyed by her independence and her insistence on having her own opinions. Isabel chafes against Osmond's arrogance, his selfishness, and his sinister desire to crush her individuality, but she does not consider leaving him. For all her commitment to her independence, Isabel is also committed to her social duty, and when she married Osmond, she did so with the intention of transforming herself into a good wife.
A young American art collector who lives in Paris, Edward Rosier, comes to Rome and falls in love with Pansy; Pansy returns his feelings. But Osmond is insistent that Pansy should marry a nobleman, and he says that Rosier is neither rich nor highborn enough. Matters grow complicated when Lord Warburton arrives on the scene and begins to court Pansy. Warburton is still in love with Isabel and wants to marry Pansy solely to get closer to her. But Osmond desperately wants to see Pansy married to Warburton. Isabel is torn about whether to fulfill her duty to her husband and help him arrange the match between Warburton and Pansy, or to fulfill the impulse of her conscience and discourage Warburton, while helping Pansy find a way to marry Rosier.
At a ball one night, Isabel shows Warburton the dejected-looking Rosier and explains that this is the man who is in love with Pansy. Guiltily, Warburton admits that he is not in love with Pansy; he quietly arranges to leave Rome. Osmond is furious with Isabel, convinced that she is plotting intentionally to humiliate him. Madame Merle is also furious with her, confronting her with shocking impropriety and demanding brazenly to know what she did to Warburton. Isabel has realized that there is something mysterious about Madame Merle's relationship with her husband; now, she suddenly realizes that Merle is his lover.
At this time, Ralph is rapidly deteriorating, and Isabel receives word that he is dying. She longs to travel to England to be with him, but Osmond forbids it. Now Isabel must struggle to decide whether to obey his command and remain true to her marriage vows or to disregard him and hurry to her cousin's bedside. Encouraging her to go, Osmond's sister, the Countess Gemini, tells her that there is still more to Merle and Osmond's relationship. Merle is Pansy's mother; Pansy was born out of wedlock. Osmond's wife died at about the same time, so Merle and Osmond spread the story that she died in childbirth. Pansy was placed in a convent to be raised, and she does not know that Merle is her real mother. Isabel is shocked and disgusted by her husband's atrocious behavior—she even feels sorry for Merle for falling under his spell—so she decides to follow her heart and travel to England.
After Ralph's death, Isabel struggles to decide whether to return to her husband or not. She promised Pansy that she would return to Rome, and her commitment to social propriety impels her to go back and honor her marriage. But her independent spirit urges her to flee from Osmond and find happiness elsewhere. Caspar Goodwood appears at the funeral, and afterwards, he asks Isabel to run away with him and forget about her husband. The next day, unable to find her, Goodwood asks Henrietta where she has gone. Henrietta quietly tells him that Isabel has returned to Rome, unable to break away from her marriage to Gilbert Osmond.