Market Chipping in the land of Ingary is a magical land that borders Wales. It is home to Sophie Hatter and her two younger sisters, Lettie and Martha. After their father dies, money becomes tight, and their step-mother (who is Martha's birth mother) is forced to place Lettie and Martha into apprenticeships, keeping Sophie as her apprentice in the family hat shop. Lettie is apprenticed at Cesari's Balery and Martha with Mrs Fairfax where she is to study magic; however the girls prefer the other's placement and Martha soon learns a simple spell that enables them to take on each other's identity and switch places.
Meanwhile, the Witch of the Waste, who is rearing her head again after fifty years of relative dormancy, has heard that Lettie has caught the eye of her "servant" come apprentice and arrives at the hat shop in anger. Believing Sophie to be Lettie she turns her into a wrinkled old woman to punish her for being so young and beautiful. Sophie cannot bear to face anyone and so flees Market Chipping slowly because she is arthritic and cannot move very fast. As she walks she finds a scruffy dog caught up in the hedgerow and frees him; later she fixes a broken old scarecrow. As darkness falls she finds herself facing sleeping outside or taking shelter in the moving castle of Wizard Howl, a sorcerer who is said to keep young girls' heart in a jar. Howl is not home so she talks her way past his apprentice, Michael, and stays overnight. She also meets Howl's fire demon, Calcifer, who promises to help her persuade Howl to let her stay permanently in exchange for her finding a way to. Real the contract of servitude he has with the wizard.
Although Sophie drives Howl insane with her cleaning he allows her to stay. She discovers that the King wants to appoint Howl to the role of Royal Magician so that he can search for his missing son, Prince Justin. Howl is reluctant to do this because it is quite dangerous and he is a coward, but by pretending that he is not looking for the Prince he can persuade himself that he isn't doing anything dangerous at all and only then can he pluck up courage to search for him.
Howl originally comes from Eales and majored in magic at University. When Michael shows him a spell he is having trouble with, Howl realizes it is not a spell at all but a poem, and that it must. E his Welsh nephew's homework, and that his nephew must have Michael's homework, which is the spell. Howl, Sophie and Michael go to Wales where they learn that the spell has already been handed in as homework, so they head to the school to meet Howl's nephew's English teacher, Miss Angorian. Sophie is jealous of Miss Angorian because she is young and pretty and because Howl seems immediately smitten with her. Miss Angorian returns the spell to him in exchange for the homework.
Howl decides the only way to make the King stop pressuring him to become Royal Magician is to send Sophie to see him, pretending to be Howl's mother, and to give him a horrible character reference which should make the King reconsider his job offer. Sophie does her part and is obligingly negative, putting particular emphasis on Howl's cowardice. The King appreciates her honesty and realizes Howl has flaws but feels this makes him even more suitable for the task and hires him anyway. Howl decides the only way to get out of the obligation is not just to relocate the castle again but to move the whole inside of the castle into another building entirely to disguise it well enough to avoid detection. He finds a storefront in Market Chipping that is available and it turns out to be the home Sophie has grown up in; after she went missing Fanny sold the shop. They love the castle, including Calcifer, to the store and open up a flower shop which is always crowded because Howl enchants the backyard of the house and it grows the most amazing array of beautiful flowers imaginable.
Desperate to prevent Sophie from getting further involved with investigating the Witch, Howl brings all of her family members to visit at once, including Martha, who is in a relationship with Michael. As they are all enjoying their reunion, Miss Angorian also drops by and anxious to be more friendly than she was during their last meeting, Sophie invites her in to wait for Howl to return. She does so but seems awkward and out of place around the excitable reunited Hatter family and so Sophie suggests she looks around rhe garden but when Sophie goes to search for her later she finds a note telling her Miss Angorian has been kidnapped by the Witch of the Waste. Furious, Sophie goes to rescue her but ends up needing to be rescued herself. Howl tells her that Miss Angorian is not an English teacher at all but the human form of the Witch's fire demon who has started to control the Witch. Sophie admits that Miss Angorian was in the house which means she is still able to appear there whenever she wants. There is a huge physical battle which involved everyone as they try to overpower Miss Angorian; after sacrificing himself to save Calcifer, Howl and Sophie at last prevail; Sophie frees Calcifer from his contract and he leaves, which gives Howl back the heart he had put into Calcifer to keep him aflame. Miss Angorian is dead and the danger vanished.
At this moment, the scarecrow she mended weeks before, and the dog that she freed, both vanish and are replaced by two young men, the missing Prince Justin and the kidnapped Wizard Suliman. Sophie is also returned to her former pretty young self; Howl is immediately smitten, and they know that they are going to be together for a very long time, in great happiness.
