Eleven-year-old Harriet M. Welsch is an aspiring writer who lives with her family in New York City's ritzy Upper East Side. She loves to write, and her goal is to one day become a novelist. She is encouraged by her nanny, Ole Golly, to keep a journal about her everyday life, and Harriet fills her journal with observations about her classmates, friends, and the people she sees in her neighborhood every day. Everything is written feverishly in her notebook, which Harriet hopes will be good practice for her future writing career. Much of what she writes focuses on her two best friends, Sport and Janie. Sport is a serious young man who wants to be a ball player or an accountant; Janie is very academic and aspires to be a scientist.
Harriet enjoys the focus and structure that keeping her notebook gives to her life. Harriet likes structure and is rather obsessive-compulsive. However, her comfortable structure is rocked when Ole Golly's boyfriend, Mr. Waldenstein, proposes marriage and Ole Golly accepts, meaning that she will leave the family. This abruptly changes Harriet's life in ways she finds difficult to cope with. Harriet's parents wonder how they will cope without Ole Golly, who admits that she had been preparing to leave soon anyway, because Harriet is becoming too old to need a nanny. Harriet was very close to Ole Golly and is devastated when she leaves for good. Her parents, who have been largely absent in her life due to both work and social commitments, find it difficult to understand Harriet's feelings of loss, and Harriet finds little solace from them.
Later at school, Harriet loses her notebook during a game of tag. Her classmates find it and read it, and are absolutely appalled by her brutally honest observations about them. For example, she states that Sport is like a little old woman because he is in charge of cleaning and cooking at home—this is because his mother left and his father is preoccupied with getting his novel published, so his best friend's observations deeply hurt Sport's feelings. Harriet's classmates, Sport and Janie included, form a Spycatcher Club whose chief purpose is to think of ways to make Harriet's life miserable. They steal her lunch, spill ink on her and pass notes about her to each other.
Harriet spies on the club through a back fence and in turn creates vengeful ways in which to punish them. She knows that she is paying the price for what she wrote, but still wants to punish her classmates for their reaction, as she is very hurt and lonely. After getting into trouble for carrying out some of the punishments she had thought of, Harriet decides to try to resume her friendship with Sport and Janie as if nothing ever happened. Both reject her overtures of friendship so Harriet devotes all of her time to writing in her notebook, even writing during class as part of her plan to punish the Spycatcher Club. Harriet skips school and spends days in bed at home, growing depressed, and because she is not paying attention to her schoolwork, her grades suffer. This leads her parents to confiscate her notebook, but this only serves to make Harriet even more depressed. Harriet's mother takes her to see a psychiatrist who advises them to contact Ole Golly and ask her to write Harriet a letter.
Ole Golly writes to Harriet, telling her that if anyone reads her notebook she will have to do one of two things—but won't like either one of them. Either she will have to apologize, or she will have to lie. Otherwise she will lose her friends. Meanwhile, there is dissent within Spy Catcher Club; self-appointed Class Queen Bee Marion and her best friend Rachel are in charge and dictate everything that happens, and very quickly Janie and Sport become tired of being bossed around. When they decide to leave the club, most of their friends do the same.
Harriet's parents speak with her teachers and the school principal, and it is decided that Harriet will replace Marion as Editor of the class newspaper. The newspaper features stories about her fellow students' parents, and the people she sees daily on her spy route. It is an overwhelming success. Harriet also prints an apology in the form of a retraction, which placates Marion, and repairs her friendship with Sport and Janie, who both forgive her.