Lily Bart, a beautiful but impoverished socialite, is on her way to a house party at Bellomont, the country home of her best friend, Judy Trenor. Her pressing task is to find a husband with the requisite wealth and status to maintain her place in New York society. Judy has arranged for her to spend more time in the company of Percy Gryce, a potential suitor who is wealthy but whom Lily finds boring. Lily grew up surrounded by elegance and luxury—an atmosphere she believes she cannot live without, as she has learnt to abhor "dinginess." The loss of her father's wealth and the death of her parents left her an orphan at about the age of twenty. Lacking an inheritance or a caring protector, she adapts to life as ward of her straight-laced aunt Julia Peniston from whom she receives an erratic allowance, a fashionable address, and good food, but little direction or parenting. Lily despises her aunt Julia and avoids her whenever possible while simultaneously relying on her for both necessities and luxuries.
Additional challenges to her success in the "marriage market" are her advancing age—at age twenty-nine she has been on the "marriage market" for more than ten years—her penchant for gambling at bridge leaving her with debts beyond her means to pay, her efforts to keep up with her wealthy friends, her innermost desire to marry for love as well as money and status, and her longing to be free of the claustrophobic constrictions and routines of upper crust society.
Threats to Lily's reputation exist because of her tendency to push the limits of polite and acceptable behavior. For example, on the way to visit Bellomont, she impulsively visits the Manhattan flat of her unmarried friend Lawrence Selden during the two-hour wait for the train. While leaving the building, she encounters Mr. Rosedale, a Jewish businessman known to her set. Attempting to cover the appearance of an indiscretion, she makes her gaffe worse by telling an obvious lie: she pretends to have been consulting her dress-maker.[g] This, it turns out, is not the only time Lily is caught in an obvious lie: she has the habit of misrepresenting herself and being caught.
Lily's week at Bellomont ends up in a series of failures beginning with losing a large sum at bridge. She fails to become engaged to Percy Gryce despite his initial interest in her. This is because although she presents herself as a conservative, innocent person to snare a conservative husband, her actions reveal that she is not the person she is pretending to be. Although she exaggerates the extent of her relationship with Percy until everyone at Bellomont thinks an engagement between them is imminent, her true character is revealed through her actions and through revelations of events from Lily's past that shock and scandalize Percy.
Near the week's end, the tall, handsome and engaging Lawrence Selden unexpectedly shows up at Bellomont. Having already failed to meet Percy for morning church services, and fully aware that Lawrence has just ended an illicit relationship with the married but vindictive Bertha Dorset, Lily chooses to go for a long walk with Lawrence and to spend the afternoon with him instead of with Percy or the rest of the party. Even though Lily has already made it clear to Selden during their tête-à-tête in his flat that she looked at him as that friend who won't be afraid to say disagreeable things to her,[h] she becomes drawn to him romantically. Succumbing to her agreeable femininity, Selden begins to fall in love with Lily. He feels safe in nurturing an emotional attachment to her because she clearly states that she cannot and will not marry a man of his modest means. Fresh out of a four-year-long affair with a married woman, Lawrence begins to slide into another emotional attachment with the equally unavailable Lily. But Bertha, who still has feelings for Lawrence even though he just broke up with her, notices his fondness for Lily and decides to sabotage Lily's budding romance with Percy by filling him in on the most salacious and scandalous rumors about Lily's card playing and past romantic life. This effectively frightens Percy away, however Lily manages to cast the blame on Judy for having been the one to set the match up.
On her last day at Bellomont, Lily creates threats to her social standing. Gus Trenor, a very skilled stockbroker, is married to Lily's best friend Judy. Judy is not particularly jealous of Gus's occasional conversations or flirtations with other women, unless he becomes so emotionally attached to them as to spend money on them or to give them money, which Judy rightly recognizes as a sign that the relationship has become a threat to their marriage. Lily is fully aware of Judy's jealousy on the money issue, and she is aware that Judy does not approve when other women, such as the financially embarrassed Carry Fisher, persuade Gus to speculate on their behalf in the stock market. Yet Lily persuades Gus to do just that. Lacking the financial knowledge to understand the difference between a legitimate loan or speculation, Lily flirts with Gus and allows him to hold her hand and lean against her. She convinces herself that Gus is making investments on her behalf and accepts several large checks from him. On several occasions, however, Gus makes it clear that he expects romantic attention from Lily in exchange for his financial expertise. Instead of discussing the issue openly, Lily begins to play cat and mouse with him. To avoid being with him in private, she appears in public with him at the opera and for late afternoon walks in Central Park with him. This attracts other people's attention.
Gradually, Lily begins to suffer the consequences of her indiscreet behavior. Percy, having been scared away by Lily's behavior and Bertha Dorset's malicious gossip, proposes to a young woman named Evie Van Osburgh, who is much better suited to him than Lily and who was introduced to him by Bertha Dorset herself. Mrs. Dorset's public pride in her match-making victory results in social ridicule for Lily from the people whom she directly and indirectly misled into thinking she and Percy were all but engaged. Finally, in retribution for a social snub, Lily's cousin Grace Stepney informs their aunt Julia about rumors that Lily has gambling debts which she may be trying to cover through an inappropriate relationship with Gus Trenor. This sows seeds of doubt and discomfort in Aunt Julia who though shocked, does not discuss the situation with her niece so as to avoid a scene.
Furthermore, Lily has destroyed her relationship with Gus and Judy Trenor. Judy's attitude toward Lily has cooled, partly due to Lily's financial relationship with Gus and partly because Lily now avoids Bellomont because she does not wish to hold up her end on what everybody else believes to be a pay-for-play relationship.
To avoid having to spend time alone with her aunt, the Trenors, Simon Rosedale, or anyone else she considers a possible source of embarrassment or boredom, Lily begins to accept invitations from people with whom she would not ordinarily socialize. These include the Wellington Brys, who are newcomers to the New York social scene whose social rise is being engineered by Carry Fisher. Carry, who earns money by acting as a social secretary to usher newly wealthy people into fashionable society, invites Lily to social events hosted by Louisa Bry. Lily also attends the opera with Carry, Simon Rosedale, and Gus Trenor. In the eyes of high society, Lily cheapens herself by voluntarily associating with her social inferiors. She returns briefly to Bellomont only to find that she is now being teased by her social peers for socializing with the upstart Brys and with Simon Rosedale.
Lily is not entirely without resources for social rehabilitation or at least blackmail. One of her aunt's temporary servants, who is also the charwoman at Selden's apartment, sells Lily a package of torn love letters. These were written by Bertha Dorset, and they represent an opportunity for Lily to blackmail her enemy. But instead of blackmailing Bertha into a positive relationship, Lily tries to neutralize the gossip by making herself useful to Bertha. Bertha, who has a new love interest in the form of a young man named Ned Silverton, relies on Lily to distract her husband George Dorset.
The extent to which Lily's reputation is damaged becomes obvious when Lily publicly appears in a way that comes across as advertising her availability for an illicit relationship. Following Mrs. Fisher's advice, the Wellington Brys throw a large "general entertainment" featuring a series of tableaux vivants portrayed by a dozen fashionable women in their set, including Miss Bart.
The pièce de résistance of this highly successful event turned out to be the portrayal of Mrs. Lloyd in Sir Joshua Reynolds' famous 18th-century painting (1775–1776). The portrait shows an attractive woman suggestively clad.[i] As the curtain opens on this last scene, the gasp of approval heard from the audience was not so much for Reynold's brilliant interpretation of Mrs. Lloyd as it was for the loveliness of Lily Bart herself—marking the pinnacle of her social success but also the annihilation of whatever reputation is left to her. For better or for worse, she has transitioned from a marriageable "girl" to a not-quite-reputable woman similar to Carry Fisher. Yet she does not do as Carry Fisher does, and accept the loss of her respectability as the price she must pay to maintain a position in society.
As Selden observes her in this elegantly simple tableau, he sees the real Lily Bart as if for the first time[j] and feels the desire to be with her. He finds her alone in the ballroom toward the end of the musical interlude, as the collective praise from her admirers is subsiding. He leads her to a garden where he tells her he loves her and they kiss. Lily sighs, " 'Ah, love me, love me—but don't tell me so!' "  and takes her leave.[k] As Selden gathers his coat to leave, he is disturbed by Ned Van Alstyne's remarks, ". . . .Gad, what a show of good-looking women; but not one of 'em could touch that little cousin of mine. . . . I never knew till tonight what an outline Lily has." 
The next day, Lily receives two notes—one from Judy Trenor inviting her to dine that evening at her town house and the other from Selden—asking to meet with her the following day. Though she had a dinner engagement, she agreed to a visit with Judy at ten o'clock. However, her late-evening encounter turns out to be with Gus alone. Gus vehemently demands the kind of attention he thought he had paid for. Pleading naivité about business matters and appealing to their friendship, she promises to pay back the almost $10,000 she owes him. With heightened anger and resentment, he accuses Lily of playing with him while entertaining other men. Lily gets him to back off and flees, getting into a hansom cab. Shaken and feeling very much alone, she is unaware that she has been seen by both Ned Van Alstyne and Lawrence Selden, both of whom were aware that Judy was out of town and that the Trenor house in New York is occupied by Gus alone. The unspoken conclusion, shared between the two men, is that the rumors of Lily's romantic involvement with Gus Trenor have a solid basis in fact. Ned, as a relative of the family, asks Lawrence to not tell anybody what they saw. But the damage is done. Lily calls on her friend Gerty Farish for succor and shelter for the rest of the night, and returns to her aunt in the morning.
The following day Lily pleads with her aunt to help her with her debts and confesses that she has lost money gambling at bridge even on Sundays. Aunt Julia refuses to help her, except to cover the $1,000 to $2,000 bill for clothes and accessories. Feeling trapped and disgraced, she turns to thoughts of Selden as her savior and has a change of heart towards him as she looks forward to his visit at four o'clock.
Instead, her visitor turns out to be Simon Rosedale who, so smitten by her appearance in the tableau vivant, proposes a marriage that would be mutually beneficial. Considering what Rosedale knows about her, she skillfully pleads for time to consider his offer [l] Selden does not appear for his 4:00 appointment nor does he send word in explanation. Instead he has departed for Havana and then on to Europe on business. This comes as a shock to Lily.
To escape the rumors arising from the gossip caused by her financial dealings with Gus Trenor, and also disappointed by what she interprets as Selden's emotional withdrawal, Lily accepts Bertha Dorset's spur-of-the- moment invitation to join her and George on a Mediterranean cruise aboard their yacht, the Sabrina. Bertha intends for Lily to keep George distracted while Bertha carries on an affair with young Ned Silverton. Lily's decision to join the Dorsets on this cruise proves to be her social undoing.
In order to divert the attention and suspicion of their social circle away from her, Bertha insinuates that Lily is carrying on a romantic and sexual liaison with George by commanding that she not return to the yacht in front of their friends at the close of a dinner the Brys held for the Duchess in Monte Carlo. Selden helps by arranging a night's lodging with her cousin Jack Stepney, under the promise that she leave promptly in the morning. The ensuing social scandal ruins Lily's reputation and almost immediately causes her friends to abandon her and Aunt Julia to disinherit her.
Undeterred by such misfortunes, Lily fights to regain her place in high society by befriending Mr. and Mrs. Gormer and becoming their social secretary, so as to introduce the Gormers to high society and groom them to take a better social position. However, her enemy, the malicious Bertha Dorset, gradually communicates to them the "scandalous" personal background of Lily Bart, and thus undermines the friendship which Lily had hoped would socially rehabilitate her. Only two friends remain for Lily: Gerty Farish (a cousin of Lawrence Selden) and Carry Fisher, who help her cope with the social ignominy of a degraded social status while continually advising Lily to marry as soon as reasonably possible.
Despite the efforts and advice of Gerty and Carry to help her overcome notoriety, Lily descends through the social strata of New York City's high society. She obtains a job as personal secretary of Mrs. Hatch, a disreputable woman who very nearly succeeds in marrying a wealthy young man in Lily's former social circle. It is during this occupation she is introduced to the use of chloral hydrate, sold in drugstores, as a remedy for malaise. She resigns her position after Lawrence Selden returns to warn her of the danger, but not in time to avoid being blamed for the crisis. Lily then finds a job in a milliner's shop; yet, unaccustomed to the rigors of working class manual labor, her rate of production is low and the quality of her workmanship is poor, exacerbated by her increased use of the drug. She is fired at the end of the New York social season, when the demand for fashionable hats has diminished.
Meanwhile, Simon Rosedale, the Jewish suitor who previously had proposed marriage to Lily when she was higher on the social scale, reappears in her life and tries to rescue her, but Lily is unwilling to meet his terms. Simon wants Lily to use the love letters that she bought from Selden's servant to expose the love affair between Lawrence Selden and Bertha Dorset. For the sake of Selden's reputation, Lily does not act upon Rosedale's request and secretly burns the love letters when she visits Selden one last time.
Eventually, Lily Bart receives a ten-thousand-dollar inheritance from her Aunt Peniston, which she arranges to use to repay Gus Trenor. Distraught by her misfortunes, Lily has by this time begun regularly using a sleeping draught of chloral hydrate to escape the pain of poverty and social ostracism. Once she has repaid all her debts, Lily takes an overdose of the sleeping draught and dies; perhaps it is suicide, perhaps an accident. That very morning, Lawrence Selden arrives to her quarters, to finally propose marriage, but finds Lily Bart dead. Among her belongings are receipts for her payments toward the debt she owed to Gus Trenor, proving that her financial dealings with Trenor were honorable and not evidence of an improper relationship. His realization allows him to feel sympathy and closeness for her, and he is clearly distraught by her death.