Miss Jessel, the live-in tutor at the Fairchild Estate, flees the house in a panic but is attacked by a ragged man.
Sometime later, in 1994, Kate Mandell becomes a governess for seven year old Flora Fairchild after Miss Jessel’s disappearance. Before leaving, she visits her mother, Darla, who lives in a mental institution because she suffers from delusions. At the Fairchild Estate, Kate is informed by the caretaker Mrs. Grose that Flora witnessed her parents die in a car accident and is a “special case.” Flora confesses to Kate that she is afraid Kate will leave her like Miss Jessel did but Kate promises not to.
That night, Kate encounters Flora’s brother Miles, who is back from boarding school. The next day, she receives a call from the school’s principal, who informs her that Miles is expelled after having been found strangling another boy. Kate becomes more aggravated with Miles when he and Flora begin pulling pranks on her, lashing out at him. Miles suggests he teach her how to ride horses to make it up to her, as their former riding instructor Quint has recently died.
Kate notices strange occurrences happening at night, so she begins to keep her lights on when she goes to sleep. One day she suggests they go into town, to the dismay of both Flora and Mrs. Grose. Flora throws a fit and runs out of the car after Kate refuses to stop it. Miles warns her to leave but Kate decides to stay due to her promise to Flora. After reconciling, the group plays tag in the house. While looking for Miles, Kate is attacked by the ghost of Miss Jessel. She finds Miss Jessel’s journal, which contains frightening entries about how Quint was obsessed with her and took pictures of her while she slept. Mrs. Grose tells her that Quint died a couple weeks following Miss Jessel’s departure when he fell from his horse while riding drunk. Kate continues to see Quint and Miss Jessel’s ghosts around the house, making her paranoid.
She receives art from her mother in the mail, and Mrs. Grose comments that she hopes Kate’s mother’s condition isn’t genetic. Kate discovers Miss Jessel’s dead body in a pond on the house’s grounds. She also has a vision of Quint raping and strangling Miss Jessel and tells Mrs. Grose, who appears to have already known about it. Mrs. Grose assures her that she made sure Quint died. Quint’s ghost pushes Mrs. Grose over the stair banister, killing her. Kate and the children flee the house, managing to escape in her car.
This previous sequence is revealed to have been Kate’s vision as she heard Mrs. Grose’s words and looked at her mother’s art. She walks in on the children talking about her and becomes convinced that she sees Quint’s ghost in the mirror, insisting that Flora saw him too, despite her protests. When Kate accidentally breaks Flora’s doll, Miles calls her delusional. They then walk out of the room. In Kate’s imagination, she walks into her mother’s institution and approaches a figure; as the figure turns around, Kate screams. The face of the figure is not revealed, and it is left open to interpretation as to whether Kate has seen her mother or is in fact seeing a reflection of herself.