An anonymous narrator recalls a Christmas Eve gathering at an old house, where guests listen to one another’s ghost stories. A guest named Douglas introduces a story that involves two children—Flora and Miles—and his sister’s governess, with whom he was in love. After procuring the governess’s written record of events from his home, he provides a few introductory details. A handsome bachelor persuaded the governess to take a position as governess for his niece and nephew in an isolated country home after the previous governess died. Douglas begins to read from the written record, and the story shifts to the governess’s point of view as she narrates her strange experience.

The governess begins her story with her first day at Bly, the country home, where she meets Flora and a maid named Mrs. Grose. The governess is nervous but feels relieved by Flora’s beauty and charm. The next day she receives a letter from her employer, which contains a letter from Miles’s headmaster saying that Miles cannot return to school. The letter does not specify what Miles has done to deserve expulsion, and, alarmed, the governess questions Mrs. Grose about it. Mrs. Grose admits that Miles has on occasion been bad, but only in the ways boys ought to be. The governess is reassured as she drives to meet Miles.

One evening, as the governess strolls around the grounds, she sees a strange man in a tower of the house and exchanges an intense stare with him. She says nothing to Mrs. Grose. Later, she catches the same man glaring into the dining-room window, and she rushes outside to investigate. The man is gone, and the governess looks into the window from outside. Her image in the window frightens Mrs. Grose, who has just walked into the room. The governess discusses her two experiences with Mrs. Grose, who identifies the strange man as Peter Quint, a former valet who is now dead.

Convinced that the ghost seeks Miles, the governess becomes rigid in her supervision of the children. One day, when the governess is at the lake with Flora, she sees a woman dressed in black and senses that the woman is Miss Jessel, her dead predecessor. The governess is certain Flora was aware of the ghost’s presence but intentionally kept quiet. The governess again questions Mrs. Grose about Miles’s misbehavior. Mrs. Grose reveals that Quint had been “too free” with Miles, and Miss Jessel with Flora. The governess is on her guard, but the days pass without incident, and Miles and Flora express increased affection for the governess.

The lull is broken one evening when something startles the governess from her reading. She rises to investigate, moving to the landing above the staircase. There, a gust of wind extinguishes her candle, and she sees Quint halfway up the stairs. She refuses to back down, exchanging another intense stare with Quint until he vanishes. Back in her room, the governess finds Flora’s bed curtains pulled forward, but Flora herself is missing. Noticing movement under the window blind, the governess watches as Flora emerges from behind it. The governess questions Flora about what she’s been doing, but Flora’s explanation is unrevealing.

The governess does not sleep well during the next few nights. One night, she sees the ghost of Miss Jessel sitting on the bottom stair, her head in her hands. Later, when the governess finally allows herself to go to sleep at her regular hour, she is awoken after midnight to find her candle extinguished and Flora by the window. Careful not to disturb Flora, the governess leaves the room to find a window downstairs that overlooks the same view. Looking out, she sees the faraway figure of Miles on the lawn.

Later, the governess discusses with Mrs. Grose her conversation with Miles, who claimed that he wanted to show the governess that he could be “bad.” The governess concludes that Flora and Miles frequently meet with Miss Jessel and Quint. At this, Mrs. Grose urges the governess to appeal to her employer, but the governess refuses, reminding her colleague that the children’s uncle does not want to be bothered. She threatens to leave if Mrs. Grose writes to him. On the walk to church one Sunday, Miles broaches the topic of school to the governess. He says he wants to go back and declares he will make his uncle come to Bly. The governess, shaken, does not go into church. Instead, she returns to the house and plots her departure. She sits on the bottom stair but springs up when she remembers seeing Miss Jessel there. She enters the schoolroom and finds Miss Jessel sitting at the table. She screams at the ghost, and the ghost vanishes. The governess decides she will stay at Bly. Mrs. Grose and the children return, saying nothing about the governess’s absence at church. The governess agrees to write to her employer.

That evening, the governess listens outside Miles’s door. He invites her in, and she questions him. She embraces him impulsively. The candle goes out, and Miles shrieks. The next day Miles plays the piano for the governess. She suddenly realizes she doesn’t know where Flora is. She and Mrs. Grose find Flora by the lake. There, the governess sees an apparition of Miss Jessel. She points it out to Flora and Mrs. Grose, but both claim not to see it. Flora says that the governess is cruel and that she wants to get away from her, and the governess collapses on the ground in hysterics. The next day, Mrs. Grose informs the governess that Flora is sick. They decide Mrs. Grose will take Flora to the children’s uncle while the governess stays at Bly with Miles. Mrs. Grose informs the governess that Luke didn’t send the letter she wrote to her employer, because he couldn’t find it.

With Flora and Mrs. Grose gone, Miles and the governess talk after dinner. The governess asks if he took her letter. He confesses, and the governess sees Quint outside. She watches Quint in horror, then points him out to Miles, who asks if it is Peter Quint and looks out the window in vain. He cries out, then falls into the governess’s arms, dead.