Narrated by an unnamed third-person narrator, The Woman Who Had Two Navels opens with Connie Escovar arriving at Pepe Monson's Hong Kong apartment to ask if he can perform surgery to correct the two bellybuttons she claims to have. Pepe believes she is telling the truth, but he laments that he is a horse doctor and therefore unable to operate on humans.
Connie tells Pepe the story of how she learned of her two navels as a girl when she pulled up the clothing on her doll. She threw the doll in her backyard pond and proceeded to hide the fact of her bellybuttons from anyone but her family and maids, who didn't seem to take notice. She says she avoided letting men discover her secret throughout her twenties. Recently, she married a man named Macho. She says she married him that morning and then fled to Hong Kong before he could discover her secret bellybuttons on their honeymoon.
Pepe explains that he is the son of a Filipino exile who fought alongside General Aguinaldo and who didn't want to return to the Philippines until it was freed. Connie says it is independent now, and Pepe replies that his father has visited. He thinks of his father sitting with a hopeless look in his eyes in the next room. Connie's presence has an odd effect on Pepe. He shivers and develops tears in his eyes as she seems to make the furniture in the room hover.
Later that afternoon, Connie's mother, Concha de Vidal, visits Pepe. She disputes Connie's account, saying she was married a year ago, she's only eighteen and not thirty, and she only has one navel. After becoming frustrated with each other, Pepe and Concha discuss how Concha, as a girl, looked up to Pepe's father, who was a local hero in Manila. The glittering memory she relates contrasts with the image of the devastated man Pepe thinks about on the other side of the wall.
Concha reveals that Connie became obsessed with Paco Texeira, a bandleader who Pepe has known since childhood, when he was performing on contract in Manila. She says Connie is in Hong Kong to chase him. Pepe is shocked to think of Paco betraying his wife, Mary.
At Mary and Paco's apartment, Pepe learns that Mary already knows about Paco's relationship with Connie and Concha, and that Mary has even met with Concha, who bought two of her watercolor paintings. Paco is reluctant to tell his wife the whole truth but insists he didn't rape Connie or her mother. He says he is staying in the apartment so much because he wants to avoid running into them. Eventually, the couple decides to go out to the park with their children. They invite Paco.
The narration shifts to a summary of Paco's time in Manila. On a six-month contract with his band the Tune Technicians, Paco meets Concha and develops a friendship that involves driving her around the city while she teaches him about the Philippines, which he had never visited before. He writes to Mary about the friendship without concern. Soon people around him and Concha joke about them being a romantic item. He scorns the attention and stops seeing Concha for a time. He senses death and doom in the atmosphere of Manila, where people seem indifferent to the realities they live in, filled with American-influenced fantasies of being like Hollywood stars.
Paco and Concha rekindle their friendship and he stops writing to Mary. He then meets Connie, who informs him that Concha is at the morgue identifying the bodies of her friends who were murdered. Out on a car ride in her convertible, Paco kisses Connie, but she resists. She comes to his club that night and they begin spending time together. Paco's passion for her grows as she evades further physical intimacy. Twice she brings him to a temple in the Chinese quarter, where she offers a plastic doll to an idol with two bellybuttons. Eventually Paco brings her to his hotel room and struggles to have sex with her. She fights him off before he can rip her dress fully off to reveal her navels.
Seeing Connie's bloody smile, Paco runs from the hotel room and falls unconscious on the beach. Two days later, he takes a ship back to Hong Kong. Paco's dialogue picks up the narration, revealing that he has been telling Pepe the story of his time in Manila. The men sit in a park; Mary has taken the children home. Paco says Connie and Concha are evil, and that they share in the pleasure of torturing people and damning their souls. Pepe refutes the idea, saying Connie's insistence on her two navels is a way of saying she has a guardian angel.
After Paco tells Pepe to leave him alone in the park, Pepe walks away, reflecting on how his father also returned early from Manila as a changed man. Pepe thinks of the literary figure of Alice going through a mirror to another world. Like her, Pepe and Paco have gone through the mirror. Now the barrier between worlds is broken open, and it threatens to affect people like him and Mary who haven't had their reality shaken so violently that they are ghosts of their former selves. Pepe thinks about himself as being surrounded by broken glass and ghosts, immersed in a reality where people are emotionally unstable and logic no longer applies. Pepe shivers and then walks toward Mary's apartment, where she is waiting with soup.