Lily Bart, the main character, is standing on a railway platform waiting for a train when Lawrence Selden sees her. He decides to see if she will greet him, and when she does he learns that she has missed her train to go to the Trenor's house. He takes a walk with her and they end up going into his apartment to enjoy some tea and a smoke. Upon leaving Selden's house, Lily encounters a Mr. Rosedale, a wealthy man who is not yet a member of the elite New York society. He is suspicious of her being in a bachelor's house and she runs into a cab and catches her train without explaining what she was doing.
On the train Lily encounters Percy Gryce, one of the very wealthy bachelors that she is hoping to marry. Lily causes them to meet "accidentally" and establishes a conversation that is interrupted when a Mrs. Dorset arrives on the train. They all end up at the Trenor's house for an extended party, and while there, Lily is able to spend time with Mr. Gryce. It appears as if they will eventually get married. The arrival of Selden ruins her plans, however, and when Lily takes an afternoon walk with Selden, a jealous Mrs. Dorset (whom we can infer is Selden's mistress) goes to Gryce and tells him all the bad things she has ever heard about Lily.
Mrs. Trenor, who was helping match Lily and Mr. Gryce, is furious with the way Lily ruined her chances with him. Lily accepts the rebuke and goes to pick up Mr. Trenor from the train station. On the way home she asks him for money, and he agrees to "invest" on her behalf. She soon receives a check for one thousand.
Several weeks later Lily attends the wedding of her cousin Jack Stepney and Gwen Van Osburgh. At the wedding Mr. Trenor gives her another check for four thousand but makes her take some time to speak to Mr. Rosedale in return. In her efforts to escape Mr. Rosedale, Lily encounters Mrs. Van Osburgh who "secretly" tells her that Mr. Gryce is engaged to her daughter Evie.
While staying at her aunt's house, Lily receives a visit from a charwoman who has letters written by Mrs. Dorset to Selden which clearly indicate an affair. Lily purchases the letters, planning to use them to get back at Bertha for ruining her chances with Percy Gryce. Rosedale also stops by one day and invites her to join him at the opera, forcing her to go by indicating he knows about her financial relationship with Mr. Trenor. She attends the opera and Mr. Trenor tries to demand to see more of her in return for the money he has given her, but Lily refuses his demands.
Lily accidentally offends Grace Stepney, a good friend of Mrs. Peniston. Grace retaliates by telling Mrs. Peniston that Lily has been gambling at bridge and thereby incurred debts. She also hints that Lily may be spending time with married men, causing Mrs. Peniston to be shocked by disbelief.
The Wellington Brys, a rich family trying to enter the upper crust society, hold a coming out party that includes a mini play where some of the ladies pretend to be in various portraits. Lily puts herself in a Reynolds and is so beautiful that Selden wants to marry her when he sees her. He finds Lily and takes her to the garden where they share a kiss before she runs away from him.
The next day she has two invitations, one from Mrs. Trenor and one from Selden. She accepts both and that night goes to the Trenor's house. Gus Trenor is there and starts trying to make her give him sexual favors for the money he lent her. She protests and appeals to his sense of being a gentleman, thereby making him stop. She leaves the house and goes to Gerty Farish's where she tells Gerty what happened to her. Unfortunately, Selden was standing outside the Trenor's house when Lily leaves it and assumes that she is having an affair with him.
The next day Lily realizes she is over nine thousand dollars in debt to Mr. Trenor. She appeals to her aunt and even admits to gambling at cards, but Mrs. Peniston refuses to hear her out and also will not pay her debts. Instead of Selden showing up, Rosedale arrives and asks her to marry him. Lily, still thinking that Selden will marry her, turns him down.
The second half of the novel starts with Lily having spent several months with the Dorsets on their yacht. They end up in Monte Carlo along with Selden and several other of the New York elite. It turns out Lily was on the yacht in order to distract Mr. Dorset so that his wife could have an affair with a young poet named Ned Silverton. While in Monte Carlo, Mr. Dorset discovers what has happened and Lily is caught in the middle. Selden convinces Mr. Dorset to do nothing, but later the next evening Mrs. Dorset kicks Lily off of the yacht, thereby starting her social rejection.
Lily returns to New York after learning that her aunt has died and goes to hear the will being read. Instead of Lily inheriting the estate, it goes to Grace Stepney, and Lily only gets about ten thousand, meaning that she can barely pay off Gus Trenor. The other women present immediately start to snub Lily.
Carrie Fisher takes pity on her and arranges for Lily to work for the Gormers, a family that is trying to make their name in society one level lower than what Lily is used to. Carrie also tells Lily that she needs to marry immediately and advises Lily to either marry George Dorset (who would marry her if he had proof of his wife's affair) or Mr. Rosedale. She rejects Mr. Dorset even after meeting with him twice and instead chooses Rosedale. When Rosedale tells her that he will only marry her after she uses the letters she purchased and renews her friendship with Mrs. Dorset, Lily rejects him as well.
Carrie Fisher again helps her out and sets her up with Mrs. Norma Hatch, a social climber one level below the Gormers. Lily realizes too late that her own reputation is suffering by association and moves out. Selden had tried to help her but only caused her to remain there longer. She next gets a job in a hat factory but is so bad at it that she soon is taking days off, claiming to be sick. Rosedale encounters her one day and walks her home. Seeing how poorly she is living, he renews his offer to her, provided she use the letters and get back at Bertha Dorset.
Lily finally decides to do what Rosedale has suggested and takes the letters. However, she passes Selden's house on the way to the Dorsets and stops there first. After some tea and a terribly sentimental episode, Lily burns the letters in his fireplace and hurries out of his apartment. She meets a woman on the streets who recognizes her, a woman whom she once gave charity money to. The woman makes Lily come home with her and warm up.
When Lily returns to her boarding house, she lays out her dresses and looks at them, remembering all the occasions she used them. After putting them away, her maid hands her a letter containing the ten thousand dollar check with her inheritance. Lily writes a check to Gus Trenor to pay off her debts and puts it by her bedside. She then takes chloral, a type of sleeping tablet, in order to fall asleep. However, she takes more than she should and dies as a result.
Selden arrives at her place the next morning, desperate to see her and clear things up between them. He is too late, however, and enters her room along with Gerty Farish to find her dead body on the bed. Gerty leaves and Selden looks around the room, recovering a note he had sent to her months before. He also sees the note to Trenor and the checkbook balance, and realizes that Lily had been in debt to Trenor. Selden is left at the end not knowing what Lily had really been doing with Trenor, but blaming life for having kept them apart.
