Emma Woodhouse, aged 20 at the start of the novel, is a young, beautiful, witty, and privileged woman in Regency England. She lives on the fictional estate of Hartfield in Surrey in the village of Highbury with her elderly widowed father, a hypochondriac who is excessively concerned for the health and safety of his loved ones. Emma's friend and only critic is the gentlemanly George Knightley, her neighbour from the adjacent estate of Donwell, and the brother of her elder sister Isabella's husband, John. As the novel opens, Emma has just attended the wedding of Miss Taylor, her best friend and former governess. Having introduced Miss Taylor to her future husband, Mr. Weston, Emma takes credit for their marriage, and decides that she rather likes matchmaking.

Against Mr. Knightley's advice, Emma forges ahead with her new interest, and tries to match her new friend Harriet Smith, a sweet, pretty, but none-too-bright parlour boarder of seventeen —described as "the natural daughter of somebody"— to Mr. Elton, the local vicar. Emma becomes convinced that Mr. Elton's constant attentions are a result of his attraction and growing love for Harriet.

But before events can unfold as she plans, Emma must first persuade Harriet to refuse an advantageous marriage proposal. Her suitor is a respectable, educated, and well-spoken young farmer, Robert Martin, but Emma snobbishly decides he isn't good enough for Harriet. Against her own wishes, the easily-influenced Harriet rejects Mr. Martin.

Emma's schemes go awry when Mr. Elton, a social climber, fancies Emma is in love with him and proposes to her. Emma's friends had suggested that Mr. Elton's attentions were really directed at her, but she had misread the signs. Emma, rather shocked and a bit insulted, tells Mr. Elton that she had thought him attached to Harriet; however Elton is outraged at the very idea of marrying the socially inferior Harriet. After Emma rejects Mr. Elton, he leaves for a while for a sojourn in Bath, and Harriet fancies herself heartbroken. Emma feels dreadful about misleading Harriet and resolves—briefly—to interfere less in people's lives.

Mr. Elton, as Emma's misconceptions of his character melt away, reveals himself to be arrogant, resentful, and pompous. He soon returns from Bath with a pretentious, nouveau-riche wife who becomes part of Emma's social circle, though the two women soon loathe each other. The Eltons treat the still lovestruck Harriet deplorably, culminating with Mr Elton very publicly snubbing Harriet at a dance. Mr Knightley, who had until this moment refrained from dancing, gallantly steps in to partner Harriet, much to Emma's gratification.

An interesting development is the arrival in the neighbourhood of the handsome and charming Frank Churchill, Mr. Weston's son, who had been given to his deceased wife's wealthy brother and his wife, the Churchills, to raise. Frank, who is now Mrs. Weston's stepson, and Emma have never met, but she has a long-standing interest in doing so. The whole neighborhood takes a fancy to him, with the partial exception of Mr. Knightley, who becomes uncharacteristically grumpy whenever his name is mentioned and suggests to Emma that while Frank is clever and engaging, he is also a rather shallow character.

A third newcomer is the orphaned Jane Fairfax, the reserved, beautiful, and elegant niece of Emma's impoverished neighbour, the talkative Miss Bates, who lives with her deaf, widowed mother. Miss Bates is an aging spinster, well-meaning but increasingly poor; Emma strives to be polite and kind to her, but is irritated by her constant chattering. Jane, very gifted musically, is Miss Bates' pride and joy; Emma envies her talent, and although she has known Jane all her life has never warmed to her personally. Jane had lived with Miss Bates until she was nine, but Colonel Campbell, a friend of her father's, welcomed her into his own home, where she became fast friends with his daughter and received a first-rate education. But now Miss Campbell has married, and the accomplished but penniless Jane has returned to her Bates relations, ostensibly to regain her health and to prepare to earn her living as a governess. Emma is annoyed to find the entire neighborhood, including Mrs. Weston and Mr. Knightley, singing Jane's praises, but when Mrs. Elton, who fancies herself the new leader of Highbury society, patronizingly takes Jane under her wing and announces that she will find her the ideal governess post, Emma begins to feel some sympathy for Jane's predicament.

Still, Emma sees something mysterious in Jane's sudden return to Highbury and imagines that Jane and Miss Campbell's husband, Mr. Dixon, were mutually attracted, and that is why she has come home instead of going to Ireland to visit them. She shares her suspicions with Frank, who had become acquainted with Jane and the Campbells when they met at a vacation spot a year earlier, and he apparently agrees with her. Suspicions are further fueled when a piano, sent by an anonymous benefactor, arrives for Jane.

Emma tries to make herself fall in love with Frank largely because almost everyone seems to expect it. Frank appears to be courting Emma, and the two flirt and banter together in public, at parties, and on a day-trip to Box Hill, a local beauty spot. However, when his demanding and ailing aunt, Mrs. Churchill, summons Frank home, Emma discovers she does not miss her "lover" nearly as much as she expected and sets about plotting a match between him and Harriet, who seems to have finally gotten over Mr. Elton. Harriet breathlessly reports that Frank has "saved" her from a band of Gypsies, and seems to be confessing her admiration for him. Meanwhile, Mrs. Weston wonders if Emma's old friend Mr. Knightley has taken a fancy to Jane. Emma immediately dismisses that idea and protests that she does not want Mr. Knightley to marry anyone, and that her little nephew Henry must inherit Donwell, the Knightley family property.

When Mr. Knightley scolds her for a thoughtless insult to Miss Bates, Emma is stunned and ashamed and tries to atone by going to visit Miss Bates. Mr. Knightley is surprised and deeply impressed by Emma's recognition of her wrongdoing, but this meaningful rapprochement is broken off when he announces he must leave for London to visit his brother. Meanwhile, Jane reportedly becomes ill, but refuses to see Emma or accept her gifts, and it is suddenly announced that she has accepted a governess position from one of Mrs. Elton's friends.

On the heels of this comes word that Frank Churchill's aunt has died, and with it the astonishing news that Frank and Jane have been secretly engaged since they first met on holiday a year ago. They had been keeping the engagement quiet because they knew that Frank's imperious aunt would disapprove and likely disinherit him if he went through with the match. The strain of the clandestine relationship had been much harder on the conscientious Jane than the carefree Frank, and the two had quarreled bitterly; but now that his aunt has died, his easygoing uncle has already given his blessing. The engagement becomes public, the secrets behind Jane and Frank's behavior are revealed, and Emma is chagrined to discover that once again she has been so wrong about so much.

Emma is certain that Harriet will be devastated by Frank's engagement, but Harriet reassures her that this is not the case. In fact, Harriet tells Emma, it is Mr. Knightley who has captured her heart, and she believes he returns her feelings. Emma is dumbstruck over what she at first thinks is the impropriety of the match, but as she faces her feelings of dismay and jealousy, she realizes in a flash that she has long been in love with Mr. Knightley herself. She is shattered to think that it may be too late and resolves to support her dear friends in whatever they do, even at the cost of her own broken heart. However, when Mr. Knightley hurries back to Highbury to console Emma over what he imagines to be the loss of Frank Churchill, she discovers that he is also in love with her. He proposes and she joyfully accepts.

There is one more match to be made: With encouragement from Mr. Knightley, the farmer Robert Martin proposes again to Harriet, and this time she accepts. Jane and Emma reconcile and all misunderstandings are cleared up before Jane and Frank leave for their wedding and life with his uncle in Yorkshire. Emma and Mr. Knightley decide that after their marriage they will live with Emma's father at Hartfield to spare Mr. Woodhouse loneliness and distress. They seem headed for a union of "perfect happiness," to the great joy of their friends. Mrs. Weston gives birth to a baby girl, to the great satisfaction of Emma, who looks forward to introducing little Miss Weston to her young nephews.