The play opens in the morning room of the Windermeres' residence in London. It is tea time and Lady Windermere—who is preparing for her coming of age birthday ball that evening—has a visit from a friend, Lord Darlington. She shows off her new fan: a present from her husband. She explains to Lord Darlington that she is upset over the compliments he continues to pay to her, revealing that she is a Puritan and has very particular views about what is acceptable in society.
The Duchess of Berwick calls and Lord Darlington leaves shortly thereafter. The Duchess informs Lady Windermere that her husband may be betraying her marriage by making repeated visits to another woman, a Mrs Erlynne, and possibly giving her large sums of money. These rumours have been gossip among London society for quite a while, though seemingly this is the first Lady Windermere has heard about it.
Following the departure of the Duchess, Lady Windermere decides to check her husband's bank book. She finds the book in a desk and sees that nothing appears amiss, though on returning she discovers a second bank book: one with a lock. After prying the lock open, she finds it lists large sums of money given to Mrs Erlynne.
At this point, Lord Windermere enters and she confronts him. Though he cannot deny that he has had dealings with Mrs Erlynne, he states that he is not betraying Lady Windermere. He requests that she send Mrs Erlynne an invitation to her birthday ball that evening to help her back into society. When Lady Windermere refuses, he writes out an invitation himself. Lady Windermere makes clear her intention to cause a scene if Mrs Erlynne appears, to which Lord Windermere responds that it would be in her best interest not to do so.
Lady Windermere leaves in disgust to prepare for the party, and Lord Windermere reveals in soliloquy that he is protecting Mrs Erlynne's true identity to save his wife extreme humiliation.
What shall I do? I dare not tell her who this woman really is. The shame would kill her.—Lord Windermere
Act II opens in the Windermeres' drawing room during the birthday ball that evening. Various guests enter, and make small-talk. Lord Windermere enters and asks Lady Windermere to speak with him, but she brushes him off.
A friend of Lord Windermere's, Lord Augustus Lorton ("Tuppy"), pulls him aside to inquire about Mrs Erlynne, with whom he is enamoured. Lord Windermere reveals that there is nothing untoward in his relationship with Mrs Erlynne, and that she will be attending the ball, which comes as a great relief to Lord Augustus as he was worried about her social standing.
After an unsuccessful attempt to make peace with his wife, Lord Windermere summons the courage to tell the truth to her, but at that moment Mrs Erlynne arrives at the party, where she is greeted coldly by Lady Windermere, spoiling his plan.
Alone, Lady Windermere and Lord Darlington discuss Mrs Erlynne's attendance. Lady Windermere is enraged and confused and asks Lord Darlington to be her friend. Instead of friendship, Lord Darlington takes advantage of Lady Windermere's tragic state and professes his love to her, offering her his life, and inviting her to risk short-term social humiliation for a new life with him. Lord Darlington sets her an ultimatum to try to convince her to take action immediately, while still in a state of shock. Lady Windermere is shocked by the revelation, and finds she does not have the courage to take the offer. Heartbroken, Lord Darlington announces that he will be leaving the country the next day and that they will never meet again, and leaves.
The guests begin to leave, and say their goodnights to Lady Windermere—some remarking positively about Mrs Erlynne. On the other side of the room Mrs Erlynne is discussing her plans with Lord Windermere; she intends to marry Lord Augustus and will require some money from Lord Windermere.
Later, Lady Windermere, in spite of her earlier reluctance, decides to leave the house at once for Lord Darlington, and leaves a note to that effect for Lord Windermere. Mrs Erlynne discovers the note and that Lady Windermere has gone, and is curiously worried by this. While reading the note, a brief monologue reveals that she is in fact Lady Windermere's mother and made a similar mistake herself twenty years previously. She takes the letter and exits to locate Lady Windermere.
How can I save her? How can I save my child? A moment may ruin a life. Who knows that better than I?—Mrs Erlynne
Lady Windermere is alone in Lord Darlington's rooms unsure if she has made the right decision. Eventually, she resolves to return to her husband, but then Mrs Erlynne appears. Despite Mrs Erlynne's honest attempts to persuade her to return home to her husband, Lady Windermere is convinced her appearance is part of some plot conceived by her and Lord Windermere. Mrs Erlynne finally breaks Lady Windermere's resistance by imploring her to return for the sake of her young child, but as they begin to exit they hear Lord Darlington entering with friends. The two women hide.
The men – who include Lord Windermere and Lord Augustus – have been evicted from their gentlemen's club at closing time and talk about women: mainly Mrs Erlynne. One of them takes notice of a fan lying on a table (Lady Windermere's) and presumes that Lord Darlington presently has a woman visiting. As Lord Windermere rises to leave, the fan is pointed out to him, which he instantly recognises as his wife's. He demands to know if Lord Darlington has her hidden somewhere. Lord Darlington refuses to co-operate, believing that Lady Windermere has come to him. Just as Lord Windermere is about to discover Lady Windermere's hiding place, Mrs Erlynne reveals herself instead, shocking all the men and allowing Lady Windermere to slip away unnoticed.
I am afraid I took your wife's fan in mistake for my own, when I was leaving your house to-night. I am so sorry.—Mrs Erlynne
The next day, Lady Windermere is lying on the couch of the morning room anxious about whether to tell her husband what actually happened, or whether Mrs Erlynne will have already betrayed her secret. Her husband enters. He is sympathetic towards her and they discuss the possibility of taking a holiday to forget the recent incident. Lady Windermere apologises for her previous suspicion of her husband and behaviour at the party, and Lord Windermere makes clear his new contempt for Mrs Erlynne – warning his wife to stay away from her.
Mrs Erlynne's arrival is announced along with the return of the fan, and despite her husband's protestations, Lady Windermere insists on seeing her. Mrs Erlynne enters and states that she shall be going abroad, but asks that Lady Windermere give her a photograph of herself and her son.
Whilst Lady Windermere leaves the room to find one, the story is revealed: Mrs Erlynne left her husband for a lover shortly after Lady Windermere's birth. When her new lover abandoned her, Mrs Erlynne was left alone and in disrepute. More recently, using the assumed name of Mrs Erlynne, she has begun blackmailing Lord Windermere to regain her lifestyle and status, by threatening to reveal her true identity as Lady Windermere's shameful mother — not dead, as Lady Windermere believes. Her son-in-law, Lord Windermere laments not having told his wife the whole story at once and resolves to tell her the truth now. Mrs Erlynne forbids him to do so, threatening to spread shame far and wide if he does.
Lady Windermere returns with the photograph which she presents to Mrs Erlynne, and requests that Lord Windermere check for the return of Mrs Erlynne's coach. Now that they are alone, and being owed a favour, Mrs Erlynne demands that Lady Windermere not reveal the truth about the events of the previous night to Lord Windermere, and Lady Windermere promises to keep the secret.
After Lord Windermere's return, Lord Augustus enters. He is shocked to see Mrs Erlynne after the events of the night before, but she requests his company as she heads to her carriage, and he soon returns to the Windermeres with news that she has satisfactorily explained the events of the evening, and that they are to marry and live out of England.
[Taking Lord Augustus' hand.] Ah, you're marrying a very good woman!—Lady Windermere
Their marriage is restored, but both Lord and Lady Windermere keep their secrets.