The story takes place on February 14, 1895. It is about two gentlemen pretending to be people other than themselves. Interwoven in their story lines are two romance-stricken ladies, each possessing an unusual allegiance to the manliness of the name Ernest. London man-about-town, Jack Worthing, who hides behind the name Ernest is an aristocrat from the country with uncertain lineage. His friend, Algernon Moncrief, is of moderate means and has also created an imaginary character, Bunbury. Algernon's cousin, Gwendolyn Fairfax, has caught the eye of Jack. Jack's ward in the country, Cecily Cardew, has caught the eye of Algernon. Lady Bracknell rules the roost with her heavy-handed social mores.
The story begins in London. Jack and Algy are discussing life and love. Both reveal to each other their imaginary characters, Ernest and Bunbury. Jack reveals that he is in love with Algy's cousin, Gwendolyn and Algy reveals that he is in love with Jack's ward, Cecily. Both gentlemen begin to scheme the pursuit of their loves. At tea that afternoon, Jack and Gwendolyn secretly reveal their love for one another. Gwendolyn makes it known that her "ideal has always been to love someone named Ernest." Jack fears she will find out his true identity. Lady Bracknell, in undulating purple silk Victorian attire, inquires as to Jack's pedigree. "Rise, sir, from that semirecumbant posture," she quips. "It is most indecorous." Jack confesses that he does not know who his parent are because he was found in a handbag in a cloakroom At Victoria Station as a baby. "A handbag?" Lady Bracknell cannot imagine her daughter forming an "alliance with a parcel."
At the Manor House in the country, Cecily is daydreaming as her governess, Miss Prism, tries to teach her German. Uninvited, Algy arrives from London and assumes the role of Ernest. While Algy and Cecily are getting acquainted in the parlor, Jack arrives in black morning clothes and informs Miss Prism that his brother, Ernest, is dead. When Algy and Cecily come out to see him, the sad news loses it's believably as everyone now thinks Algy is Ernest. In pursuit of Jack, Gwendolyn arrives from London and meets Cecily. They both discover that they are engaged to Ernest, not realizing one is Jack and one is Algy. When the men arrive in the garden, the confusion is cleared up. The ladies are put off that neither one is engaged to someone named Ernest.
Lady Bracknell arrives by train to Manor House. As everyone gathers in the parlor, Lady Bracknell recognizes Miss Prism as her late sister's governess of twenty-eight years ago. "Where is the baby," she bellows. Miss Prism confesses that she inadvertently left the baby in her care in her handbag at Victoria Station. Jack realized they are talking about him. He retrieves the handbag from his private room and shows Miss Prism. She acknowledges that the bag is hers. Lady Bracknell then tells Jack that he is her late sister's son and the older brother to Algy. Unable to ascertain who his father was, Jack look in an Army journal, as his father was a general, and realizes that his father's name was Ernest.
The film ends with Jack saying, "I've now realized for the first time in my life the vital importance of being earnest."