Edward Lewis (Richard Gere), a successful workaholic businessman and corporate raider in Los Angeles on business, accidentally takes a detour on Hollywood Boulevard while looking for Beverly Hills. He unsuccessfully tries to ask for directions and ends up in the red-light district, where he encounters a hooker named Vivian Ward (Julia Roberts), who mistakes him for a possible client. Her roommate and best friend, Kit De Luca (Laura San Giacomo), encourages her to recruit him, though he only wants directions and makes a deal with her to pay her if she shows him the way. Intrigued by her knowledge and wit he hires her to spend the night with him for $300 in his hotel's penthouse apartment, treating her to strawberries and champagne and sharing personal information with her. He comes to trust her as she "surprises" him by flossing her teeth after eating the strawberries (and not doing drugs as he thought she was more likely to do given her profession). They spend the night watching I Love Lucy reruns and having sex.
The morning after, Edward hires Vivian to stay with him for a week as an escort for social events. She advises him that it will cost him, and he agrees to pay her $3,000 and gives her money and access to his credit cards to buy suitable elegant clothing. She then goes shopping on Rodeo Drive, only to be snubbed by saleswomen who disdain her because of her unsophisticated and overly sexual appearance. Initially, hotel manager Barney Thompson (Hector Elizondo) is also somewhat hostile towards her but slowly relents and instead helps her find a dress and even coaches her on dinner etiquette. Edward returns and is visibly amazed by her transformation. The business dinner does not end well, however, with Edward making clear his intention to dismantle James Morse's corporation once it was bought, close down the shipyard which Morse had spent 40 years building, and sell the land for real estate. Morse and his grandson, David, abandon their dinner in anger, while Edward remains preoccupied with the deal afterward. Back at the hotel, he reveals to Vivian that he had not spoken to his recently deceased father for 14½ years. She attempts to cheer him up but he rebuffs her and leaves. Later that night, lonesome and worried, she goes looking for him. She tries again to console him and they end up having sex on the grand piano in the hotel lounge.
The next morning Edward asks Vivian about her buying only one dress and she, upset, tells him about the snubbing that took place the day before. He takes her to a store where he makes sure that the staff will indulge her. He leaves her with money and his credit cards and she goes on a shopping spree. Now wearing very elegant clothes Vivian returns carrying all the bags, to the shop that had snubbed her, telling the saleswomen they had made a big mistake and announcing nonchalantly that she "has to go shopping now" leaving them speechless.
The following day, Edward takes Vivian to a polo match he sponsors in hopes of networking for his business deal. She meets some of his snooty upperclass friends and tells him that she understands why he came looking for her. While she chats with David Morse, who is there playing polo, Phillip Stuckey, Edward's attorney begins to suspect that she is a spy. Edward reassures him by telling him how they met, and that she is in fact a sex worker, and Phillip (Jason Alexander) approaches her and offers to hire her once she is finished with Edward, insulting her. When they return to the hotel, she is furious with Edward for telling Phillip about her and plans to leave, but he apologizes, confessing his jealousy towards David and persuades her to see out the week. He, elated, leaves work early the next day to take her on a date to the opera in San Francisco in his private jet. Vivian is moved to tears by the opera (which is La traviata, whose plot deals with a rich man tragically falling in love with a courtesan). Clearly growing closer they later play chess and she convinces him to take the next day off.
They spend the next day entirely together talking and enjoying each other's company. During the night Vivian breaks her "no kissing on the mouth" rule and they end up making love for the very first time. Just before she falls asleep in his arms she admits that she's in love with him. Over breakfast the next day he offers to put her up in an apartment so she can be off the streets but she rejects it, insulted and says this is not the "fairy tale" she wants. Telling him a story of her childhood fantasy, he then goes off to work without resolving the situation. Kit, collecting money from her, comes to the hotel and realizes that she is in love with Edward. She reluctantly encourages Vivian to pursue a relationship with him.
In the meantime, Edward meets with Morse and is about to close the deal, but changes his mind at the last minute. His time with Vivian has shown him another way of living and working, taking time off and enjoying activities he never cared for. As a result, his strong interest towards his business is put aside. He decides that he would rather help Morse than take over his company. Morse still has his Navy contracts that could make his company a lot richer and Edward bluffed a little, the contracts were delayed not destroyed. With those Navy Contracts, Edward 10 million shares of the company he owns, they will build big ships together. That was Edward's dream: to build things, instead of tearing them down. Furious over the loss of so much money, Phillip goes to the hotel to confront Edward, but finds only Vivian. He blames her for changing Edward and tries to grope her. She bites his hand to make him stop and a furious Phillip slaps and tries to rape her. Edward arrives in time to stop him, hitting him while chasing him for his greed and then throws him out.
Edward tends to Vivian and tries to persuade her to stay with him because she wants to, not because he's paying her but she refuses once again and returns to the apartment she shared with Kit, preparing to leave for San Francisco to earn a GED. With his business trip done, Edward packs and gets ready to head back to New York. He pauses in the lobby and asks Barney to return the jewelry that Vivian wore on their date to the opera. He states that "it must be hard letting go of something so beautiful" and informs Edward that the limo's chauffeur drove Vivian home the day before. He gets into the car with the chauffeur but instead of going to the airport, he goes to her apartment arriving with music from La traviata. He climbs up the fire escape, despite his fear of heights, with a bouquet of roses clutched between his teeth to woo her. Edward, leaping from the white limo and then climbing the fire escape, is a visual urban metaphor for the knight on a white horse rescuing the princess from the tower, the childhood fantasy Vivian told him about. The film ends as they kiss passionately on the fire escape. They declare their love to each other.