The story takes place on February 14, 1895. It is about two gentlemen pretending to be people other than themselves. Interwoven in their storylines 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 Moncrieff, is of moderate means and has also created an imaginary character, Bunbury. Algernon's cousin, Gwendolen 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, Gwendolen, and Algy reveals that he is in love with Jack's ward, Cecily. Both gentlemen begin to scheme the pursuit of their love. At tea that afternoon, Jack and Gwendolen secretly reveal their love for one another. Gwendolen makes it known that her "ideal has always been to love someone by the name of Ernest." Jack fears she will find out his true identity. Lady Bracknell inquires as to Jack's pedigree. Jack confesses that he does not know who his parents are because, as a baby, he was found in a handbag in a cloakroom at Victoria Station. Lady Bracknell will not allow her daughter "—a girl brought up with the utmost care—to marry into a cloak-room, and form 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 with the parlor, Jack arrives in black mourning clothes and informs Miss Prism that his brother, Ernest, is dead. When Algy and Cecily come out to see him, the sad news loses its believability as everyone now thinks Algy is Ernest. In pursuit of Jack, Gwendolen arrives from London and meets Cecily. They both discover that they are engaged to Ernest, not realising 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. As everyone gathers in the drawing room, Lady Bracknell recognises Miss Prism as her late sister's baby's governess from twenty-eight years before. Miss Prism confesses that she inadvertently left the baby in her handbag at Victoria Station. Jack realised 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 looks in an Army journal, as his father was a general, and realises that his father's name was Ernest. Thus it becomes apparent that his real name is also Ernest – as Lady Bracknell says, being the eldest son, he must have been named after his father.
The film ends with Jack saying, "I've now realised for the first time in my life the vital importance of being earnest."
