Newland Archer, gentleman lawyer and heir to one of New York City's most illustrious families, happily anticipates his highly desirable marriage to the sheltered and beautiful May Welland. Yet he finds reason to doubt his choice of bride after the appearance of Countess Ellen Olenska, May's exotic and beautiful 30-year-old cousin. Olenska strikes Archer as the opposite of the innocent and ignorant May Welland. Ellen has returned to New York from Europe after scandalously separating herself (per rumor) from a disastrous marriage to a Polish count. At first, Ellen's arrival and its potential taint on the reputation of his bride-to-be's family disturbs Newland, but he becomes intrigued by the worldly Ellen, who brazenly flouts New York society's fastidious rules. As Newland's admiration for the countess grows, so do his doubts about marrying May, a perfect product of Old New York society; his match with May no longer seems the ideal fate he had imagined.
Ellen's decision to divorce Count Olenski causes a social crisis for the other members of her family, who are terrified of scandal and disgrace. Living apart can be tolerated, but divorce is unacceptable. To save the Welland family's reputation, a law partner of Newland asks him to dissuade Countess Olenska from going through with the divorce. He succeeds, but in the process comes to care for her. Afraid of falling in love with Ellen, Newland begs May to accelerate their wedding date, but she refuses.
Newland tells Ellen he loves her; Ellen corresponds, but is horrified that their love will aggrieve May. She agrees to remain in America, separated but still married to Count Olenski, only if they do not sexually consummate their love. Newland receives May's telegram agreeing to wed sooner.
Newland and May marry. He tries unsuccessfully to forget Ellen. His society marriage is mediocre, and the social life he once found absorbing has become empty and joyless. Though Ellen lives in Washington and has remained distant, he is unable to cease loving her. Their paths cross while he and May are in Newport, Rhode Island. Newland discovers that Count Olenski wishes Ellen to return to him, but she has refused, although her family wants her to reconcile with her husband and return to Europe. Frustrated by her independence, the family has cut off her money, as the count had already done.
Newland desperately seeks a way to leave May and be with Ellen, obsessed with how to finally possess her. Despairing of ever making Ellen his wife, he urges her to become his mistress. Then Ellen is recalled to New York City to care for her sick grandmother, who accepts her decision to remain separated and agrees to reinstate her allowance.
Back in New York and under renewed pressure from Newland, Ellen relents and agrees to consummate their relationship. However, Newland then discovers that Ellen has decided to return to Europe. Newland makes up his mind to abandon May and follow Ellen to Europe when May announces that she and Newland are throwing a farewell party for Ellen. That night, after the party, Newland resolves to tell May he is leaving her for Ellen. She interrupts him to tell him that she learned that morning that she is pregnant; she reveals that she had told Ellen of her pregnancy two weeks earlier, despite not being sure of it at the time. The implication is that May did so because she suspected the affair and that this is Ellen's reason for returning to Europe. Hopelessly trapped, Newland decides to remain with May and not to follow Ellen, surrendering his love for the sake of his child.
Twenty-six years later, after May's death, Newland and his eldest son are in Paris. The son, learning that his mother's cousin lives there, has arranged to visit Ellen in her Paris apartment. Newland is stunned at the prospect of seeing Ellen again. On arriving outside the apartment building, Newland sends up his son alone to meet Ellen, while he waits outside, watching the balcony of her apartment. Newland considers going up, but in the end decides not to; he walks back to his hotel without seeing her. Newland's final words about the love affair are "It's more real to me here than if I went up."