Seventeen-year-old Catherine Morland is one of ten children of a country clergyman. Although a tomboy in her childhood, by the age of 17 she is "in training for a heroine" and is excessively fond of reading Gothic novels, among which Ann Radcliffe's Mysteries of Udolpho is a favourite.

Catherine is invited by the Allens, her wealthier neighbours in Fullerton, to accompany them to visit the town of Bath and partake in the winter season of balls, theatre and other social delights. Although initially the excitement of Bath is dampened by her lack of acquaintances, she is soon introduced to a clever young gentleman, Henry Tilney, with whom she dances and converses. Much to her disappointment, Catherine does not see Henry again for quite some time. Through Mrs Allen's old school-friend Mrs Thorpe, she meets her daughter Isabella, a vivacious and flirtatious young woman, and quickly becomes friends. Mrs Thorpe's son John is also acquainted with Catherine's older brother, James.

James and John soon arrive in Bath. While Isabella and James spend time together, Catherine becomes acquainted with John, a vain and crude young gentleman who incessantly tells fantastical stories about himself. Henry Tilney then returns to Bath, accompanied by his younger sister Eleanor, who is a sweet, elegant, and respectable young lady. Catherine also meets their father, the imposing General Tilney.

The Thorpes are not very happy about Catherine's friendship with the Tilneys, as they (correctly as it happens) perceive Henry as a rival for Catherine's affections. Catherine tries to maintain her friendships with both the Thorpes and the Tilneys, though John Thorpe continuously tries to sabotage her relationship with the Tilneys. This leads to several misunderstandings, which upset Catherine and put her in the awkward position of having to explain herself to the Tilneys.

Isabella and James become engaged. James's father approves of the match and offers his son a country parson's living of a modest sum, 400 pounds annually, which he may have in two and a half years. The couple must therefore wait until that time to marry. Isabella is dissatisfied, having believed that the Morlands were quite wealthy, but she pretends to Catherine that she is merely dissatisfied that they must wait so long. James departs to purchase a ring, and John accompanies him after coyly suggesting marriage to the oblivious Catherine. Isabella immediately begins to flirt with Captain Tilney, Henry's older brother. Innocent Catherine cannot understand her friend's behavior, but Henry understands all too well, as he knows his brother's character and habits. The flirtation continues even when James returns, much to the latter's embarrassment and distress.

The Tilneys invite Catherine to stay with them for a few weeks at their home, Northanger Abbey. Catherine, in accordance with her novel reading, expects the abbey to be exotic and frightening. Henry teases her about this, as it turns out that Northanger Abbey is pleasant and decidedly not Gothic. However, the house includes a mysterious suite of rooms that no one ever enters; Catherine learns that they were Mrs Tilney's, who died nine years earlier. Catherine decides that, since General Tilney does not now seem to be affected by the loss of his wife, he may have murdered her or even imprisoned her in her chamber.

Catherine persuades Eleanor to show her Mrs Tilney's rooms, but General Tilney suddenly appears. Catherine flees, sure that she will be punished. Later, Catherine sneaks back to Mrs Tilney's rooms, to discover that her over-active imagination has once again led her astray, as nothing is strange or distressing in the rooms at all. Unfortunately, Henry joins her in the corridor and questions why she is there. He guesses her surmises and inferences, and informs her that his father loved his wife in his own way and was truly upset by her death. "What have you been judging from? Remember the country and the age in which we live. Remember that we are English, that we are Christians. Consult your own understanding, your own sense of the probable, your own observation of what is passing around you. Does our education prepare us for such atrocities? Do our laws connive at them? ... Dearest Miss Morland, what ideas have you been admitting?"[1] She leaves, crying, fearing that she has lost Henry's regard entirely.

Realizing how foolish she has been, Catherine comes to believe that, though novels may be delightful, their content does not relate to everyday life. Henry lets her get over her shameful thoughts and actions in her own time and does not mention them to her again.

Soon after this adventure, James writes to inform her that he has broken off his engagement to Isabella because of her flirtations with Captain Tilney. The Tilneys are shocked, and Catherine is terribly disappointed, realizing what a dishonest person Isabella is. The General goes off to London, and Eleanor becomes less inhibited and shy away from his imposing presence. Catherine passes several enjoyable days with Henry and Eleanor until he returns abruptly, in a temper. Eleanor tells Catherine that the family has an engagement that prevents Catherine from staying any longer and that she must go home early the next morning, in a shocking, inhospitable move that forces Catherine to undertake the 70 miles (110 km) journey alone.

At home, Catherine is listless and unhappy. Her parents, unaware of her trials of the heart, try to bring her up to her usual spirits, with little effect. Two days after she returns home, however, Henry pays a sudden unexpected visit and explains what happened. General Tilney (on the misinformation of John Thorpe) had believed her to be exceedingly rich and therefore a proper match for Henry. In London, General Tilney ran into Thorpe again, who, angry at Catherine's refusal of his half-made proposal of marriage, said instead that she was nearly destitute. Enraged, General Tilney returned home to evict Catherine. When Henry returned to Northanger from Woodston, his father informed him of what had occurred and forbade him to think of Catherine again. When Henry learns how she had been treated, he breaks with his father and tells Catherine he still wants to marry her despite his father's disapproval. Catherine is delighted.

Eventually, General Tilney acquiesces, because Eleanor has become engaged to a wealthy and titled man; and he discovers that the Morlands, while not extremely rich, are far from destitute.