On May 3, 1977, Lydia Lee, the middle child of the Lee family is missing. After several days, her body is dredged out of the town lake. Lydia's parents, James and Marilyn, are horrified by their daughter's death. As the police investigate, her parents discover that contrary to their belief that Lydia was popular and doing well in school, she was actually a loner with almost no friends and that her grades had severely slipped.
The death of their child leads James and Marilyn to reflect on their lives. James, the academically gifted child of Chinese immigrants, spent his life yearning to belong. He met Marilyn in 1957 when he was a doctoral candidate at Harvard teaching a class on American culture in which she was a student. After graduation, James failed to secure a faculty position at Harvard, so accepted an offer from the fictional Middlewood College in Ohio. Marilyn grew up disgusted by her homemaker mother (who taught home economics in her high school) and longed to become a doctor. When she met James and recognized the racist treatment he had been enduring, Marilyn felt a kinship with him and the two began an affair. Discovering she was pregnant, she arranged for a quick marriage to James and was angry when her mother tried to stop the wedding after seeing that James is of Asian descent.
Marilyn intended to resume her studies to become a doctor after her son, Nathan, was born, but after a second pregnancy, with Lydia, she remained a homemaker for eight years. Upon receiving news of her estranged mother's death, Marilyn returned to her childhood home in Virginia to deal with her mother's possessions only to realize that she has become the homemaker her mother always desired. Marilyn abandons the family in order to pursue her academic studies. James believes that she has left because he and the children are Asian and that she no longer wants to deal with the societal pressure of being outsiders.
Marilyn's absence lasts nine weeks, during which she discovers that she is pregnant with a third child, Hannah. She returns home and realizes that she will never have the will to abandon her children and pursue a career again. Instead, she begins to encourage Lydia to become a doctor, aggressively training her in math and sciences. During Marilyn's absence, James also begins favouring Lydia and bullying Nath, whom James perceives to be as friendless as James was in childhood. Nath becomes jealous of Lydia and one day pushes her into the lake even though she cannot swim. However, the ease with which she falls causes Nath to realize that Lydia is drowning under the weight of her parents' expectations. He rescues her and the two become close.
By the time they are teenagers, Lydia begins buckling under the weight of her mother's expectations and cannot keep up with the advanced courses her mother encourages her to take. She also is tired of pretending that she has friends in order to assuage her father. She begins to hang out with Jack, her next door neighbor whom Nath hates, and who has a reputation for deflowering town girls. Meanwhile, Nath, who has spent the past few years being ignored by his parents, is accepted to Harvard. Lydia is scared of being abandoned by Nath and hides his acceptance letter. When she is caught, a rift develops between them. Lydia goes to Jack, hoping to have sex with him, but Jack confesses that he is in love with Nath, and that his reputation as a Lothario is a pretense. Returning home, Lydia is determined to reveal her shortcomings to her father and mother. Tracing her unhappiness to the time her brother pushed her into the lake, Lydia goes there late at night intending to jump into the water and swim back to shore.
In the present, Marilyn discovers that after Lydia's death, James has begun an affair with one of his graduate students, Louisa Chen, who is also of Chinese descent. Marilyn learns that he believes that she resents their marriage because he and the children are not white. James leaves Marilyn. Eventually he returns, and he and Marilyn slowly begin to reconnect. Nath, who still believes that Jack is responsible for Lydia's death, confronts him by the lake, punching him twice before Hannah, who has realized that Jack is in love with Nath, stops him. Nath falls into the lake, where he realizes that he will never understand Lydia's death and achieves a modicum of closure. He is pulled out of the lake by Jack, and it is implied that he may return those feelings later in life.