Liza Winthrop first meets Annie Kenyon at the Metropolitan Museum of Art on a rainy day. The two become fast friends, although they come from different backgrounds.
Liza is the student body president at her private school, Foster Academy, where she is studying hard to get into MIT and become an architect. She lives with her parents and younger brother in the upscale neighborhood of Brooklyn Heights, where most residents are professionals.
Annie goes to a public school and lives with her parents—a bookkeeper and a cabdriver—and grandmother in a lower-income part of Manhattan. Although Annie is not sure if she will be accepted, she hopes to attend the University of California, Berkeley to develop her talent as a singer.
While they have different histories and goals in life, the two girls do share a close friendship that quickly grows into love. Liza's school is struggling to remain open and she finds herself having to defend a student who planned a poorly conceived program: ear piercing in the school basement. This results in a three-day school suspension for Liza and helps to bring Liza and Annie closer together as they both deal with the struggles encountered by many high school students.
The suspension and the partly concomitant Thanksgiving break give the girls time to become closer and lead to their first kiss. Annie admits that she has thought that she may be gay. Liza soon realizes that although she has always considered herself different, she has not considered her sexual orientation until falling in love with Annie.
When two of Liza's female teachers (who live together) go on vacation during spring break, she volunteers for the job of taking care of their home and feeding their cats. The two girls stay at the house together, but in an unexpected turn of events a Foster Academy administrator discovers Liza and Annie together. Liza is forced to tell her family about her relationship with Annie, and the headmistress of her school organizes a meeting of the school's board of trustees in order to expel Liza. The board rules in favor of Liza staying at Foster, and she is allowed to keep her position as student president. However, the two teachers, who in the process are discovered to be gay, are fired. After their initial shock at discovering the girls together, the teachers are very supportive and go out of their way to reassure Liza not to worry about their dismissal, but Liza's guilt and confusion still causes her to end her relationship with Annie, and the girls go their separate ways to colleges on different coasts. In the end, Liza's reevaluation of her relationship while at college and her corresponding acceptance of her sexual orientation allow the two girls to reunite.
The book is framed and narrated by Liza's thoughts as she attempts to write Annie a letter, in response to the many letters Annie has sent her. This narration comes right before the winter break of both their colleges' and Liza is unable to write or mail the letter she had been working on. Instead she calls Annie, and the two reconcile and decide to meet together before going home for winter break.