Pod and Homily Clock, as well as their daughter, Arrietty, are Borrowers, tiny people who live secretly in human houses and “borrow” food and any other items they need. They were forced to flee their first home when a housekeeper discovered them. After a harrowing journey, they found the home of their extended family in a nearby cottage, but a famine forced the Clocks to move yet again. They end up in a model village called Little Fordham, but are kidnapped by the owners of a rival model village. After escaping in a hot air balloon, they temporarily return to Little Fordham while they search for a new home.
Pod and Spiller, a family friend and fellow Borrower, go on a journey to find a suitable home for the Clocks, leaving Homily and Arrietty behind to pack up the house. The men return with news of the Hendrearys, their relatives, who are living in Fordham’s church. Pod also explains that the rectory near the church is mostly empty, housing only the caretaker and his wife, which would make it an ideal home for the Clocks. They load all of their belongings into Spiller’s boat and travel upstream toward the rectory.
Unbeknownst to the Clocks, their former captors, the Platters, plan to hold a vigil outside of Little Fordham. They expect the Clocks to return to their old house but don’t think they could have traveled back so quickly. They take their boat up the river and wait for the Clocks to arrive so they can recapture the family. The Platters arrive just as the Clocks and Spiller depart, and the Borrowers narrowly escape. The Platters attempt to search the model village, but end up inadvertently destroying many of the miniature buildings. They do find Homily’s old apron.
When they arrive at the rectory, the Clocks leave most of their belongings in Spiller’s boat, bringing only the essentials inside. The Clocks find an old stove in an unused portion of the house and plan to live there until they can find a suitable permanent home. The exhausted Borrowers go to sleep.
Arrietty awakens before her parents the next morning and begins to explore the room a bit. She hears a sound and hides. Watching from her hiding place, she sees a young Borrower with a limp coming to collect water from a nearby drain. The cup he is using for the water is a bit too large and full for him to move, so Arrietty comes out of her hiding place to help him. He introduces himself as Peagreen (or Peregrine) Overmantel.
Peagreen lived over the fireplace with his family, but when he was a young boy, his family had to move because the humans were renovating the fireplace. In the commotion, he fell off of the mantel and broke his leg. His family was in such a rush that they left him behind. Another family of Borrowers took him in, but eventually they moved away, too, and now he lives in the rectory alone.
Peagreen leaves, but Arrietty urges him to come back later that afternoon to meet her parents. The Clocks decide that they should move the rest of their belongings in later that night, since there will be a full moon. Pod searches the rectory for a suitable place for the Clocks to set up their house but is unable to find one. The Clocks sadly prepare to leave the rectory to find a new home when Peagreen shows up. The Clocks explain their plight and Peagreen tells them that he had just recently moved to a new place closer to the pantry and that his old home is empty if they would like it.
Peagreen leads them through a secret passage near the base of the fireplace. The passage ends inside a window seat in the library. There is a grate nearby that provides easy access to the outside. The Clocks are delighted and immediately begin making plans to move their belongings in and renovate the burrow. With Spiller’s and Peagreen’s help, they complete the move the next night.
A few days later, after the Clocks are settled, they go to visit the Hendrearys. Arrietty is delighted to see her young cousin Timmus, who she used to tell stories to and is very fond of, and Homily is pleasantly surprised by Lupy’s newfound kindness and generosity. The Hendrearys and Clocks begin to visit each other more often and even develop a system for sharing borrowings — Timmus and Arrietty work together to borrow from the rectory’s garden, supplying vegetables for both families.
Meanwhile, the Platters are becoming rather desperate to find the Clocks. Mr. Platter is a builder and landlord, in addition to an undertaker, so he often does small repairs for his tenants. One of the houses he maintains belongs to Lady Mullings, who has a reputation for finding things. It is said that she sometimes has visions of missing items and can locate them based on the visions. Mr. Platter brings Homily’s apron to Lady Mullings when he comes to do repairs and asks her if she could locate the apron’s owner. She agrees to try, but first she has to go to church to finish the Easter decorations.
After he finishes his work at Lady Mullings’ house, Mr. Platter goes to the church to deliver his bill and ask about the apron. Mrs. Platter also shows up at the church, looking for her husband, since he is out later than she had anticipated. Arrietty and Timmus had returned to the Hendrearys’ home shortly before and decided to watch the decorators from a carved screen in the front of the church. Arrietty desperately longs to see her old friend Miss Menzies, but has promised her parents not to speak to people anymore. Arrietty hides atop the screen, whereas Timmus pokes his head through so his face blends in with the carved wooden faces on the screen.
Lady Mullings is unable to find the apron’s owner through a vision, but while Lady Mullings is talking to the Platters, Mrs. Platter sees Timmus yawn. After Lady Mullings leaves, Mrs. Platter tells her husband about the yawn, and they attempt to capture him.
Timmus escapes into the church’s collection box, which one of the church ladies then locks in a cabinet with all the other valuables. The Platters are forced to leave since the church needs to be locked up, but they make plans to break in later that night to kidnap Timmus.
The Platters break in to the church and open the cabinet to find Timmus, pulling out all of the church’s treasures, which include jewels and expensive candlesticks. Timmus runs out of the cabinet and climbs the rope of the church’s bell. The Platters accidently ring the bell while attempting to catch Timmus, which wakes up the church’s caretakers. Seeing the lights on in the church and hearing the bell again, the caretakers call a policeman, and all of them go to investigate.
They find the Platters there with all of the church’s valuables still on the table. The policeman tells them to come down to the station the next morning despite the Platters’ assertions that they are innocent. The Borrowers never hear from the Platters again, but it is assumed that they either went to prison or fled to Australia.