Sophie Hatter lives in the country of Ingary, where such things as wizards and magic are a normal part of life. She takes care of her younger sisters, Lettie and Martha, while her father and stepmother run a hat shop. After his death, their stepmother, Fanny, must see the girls positioned into apprenticeships.
Lettie is sent to a bakery, while Martha is sent to learn magic from Fanny’s childhood friend Mrs. Fairfax. Sophie remains at the hat shop. As she makes hats, she often speaks to them saying things like, “You will marry money,” or “You have a good heart; someone important will fall in love with you.” Her friend Jane runs away with a count while wearing that hat.
Sophie sets out to visit Lettie at the bakery. A handsome rogue in a bright robe offers to guide her to the bakery, but she refuses. She finds Lettie overwhelmed by men wanting to be served by her. When the sisters finally find a quiet place to talk, Sophie learns that it is Martha, looking like Lettie, who is serving at the shop. Martha learned a spell from the witch she was serving and has swapped appearances with Lettie because Lettie wanted to learn magic more than Martha did.
The following morning, after Sophie has returned home, she receives a surprise visit from the Witch of the Waste. The fearsome sorceress accuses Sophie of trying to rival her power (through her speaking to the hats). As punishment, the witch casts a spell that ages Sophie.
The spell prevents her from telling anyone that she is under a curse. Being a practical girl, even though she now looks elderly, Sophie decides she must leave the hat shop. Customers would never buy a hat from her.
Sophie decides to try to make her fortune in the world. As she heads out of town, she finds a toppled scarecrow. She rights him and offers him luck finding his way home. She continues up the hill and comes upon a dog tied to a stick and choking. She frees the dog and uses the stick to help her walk.
As the day progresses, Sophie longs for a comfortable chair and a fire by which to sit. Her wish is granted when she spies the Wizard Howl’s moving castle. Although he is rumored to eat the souls of young girls, Sophie figures she is safe since she is old.
His house rambles across the hillside, but Sophie manages to find the back door and to jump inside. She makes a deal with Calcifer, the fire demon living inside the fireplace. He will let her stay, and help her break the witch’s curse, if she is able to help him break the contract he has with Howl. Unfortunately, she must discover what the contract is, as both Calcifer and Howl cannot disclose it.
The house does more than travel. It has a magic door that opens to four different locations. One place is Ingary, Sophie’s homeland. There the people view Howl as a villain to be feared. In Porthaven, a seaside town, the villagers come to him for potions to calm the sea and bring their loved ones safely home. The door also opens to Kingsbury, whose king desires Howl to find his lost brother and another missing wizard whom he believes to be captives of the Witch of the Waste. Howl will not disclose the last location to Sophie, telling her to mind her own business.
Sophie manages to ingratiate herself into the lives of Howl and his apprentice, a young man named Michael. She cleans the main room of the house and Michael’s bedroom. Howl’s bathroom is his sanctuary, and he spends several hours in it daily, bathing.
Sophie realizes he was the splendid young man who had offered to help her on May Day. Michael informs her that Howl loves to woo women, but once they love him in return, he is no longer interested. Sophie guesses this is where he got the reputation of “eating” girls’ souls. She soon gets her own reputation, as people in the various towns believe she is a witch, perhaps even Howl’s mother.
When Sophie cleans the bathroom, she accidently mixes up some of Howl’s powders, causing him to use something on his hair that turns it pink. Howl is despondent, creating green goo that threatens to cover the house and extinguish Calcifer. Sophie and Michael manage to clean both Howl and house of the slime, but Sophie learns something from Howl’s outburst. The new woman he is pursuing is her sister Martha, who still looks like their beautiful sister, Lettie.
Sophie knows she must warn Martha not to lose her heart to the fickle Howl. She plans to set off for home after Michael and Howl leave for the day, but she is stopped when a scarecrow appears at the castle door. It is the same one she helped on her way up the hill. Petrified, Sophie orders Calcifer to make the castle move faster, hoping to outrun it. Michael returns in the evening, thrilled to announce that the girl Howl is in love with is not his Lettie, who works at the bakery. Sophie realizes that Michael is actually in love with Martha, and the real Lettie must be warned not to give in to Howl’s attentions.
When Howl returns, he asks Sophie to pretend to be his mother and convince the king that Howl should not be sent into the Waste to look for Prince Justin and the Wizard Suliman. Howl does not want to go because he has been evading a curse that the witch sent for him the previous year.
Sophie and Michael use a pair of magic boots to help them get to Upper Folding quickly. When they arrive at Mrs. Fairfax’s home, they find Howl already there, courting Lettie. Mrs. Fairfax knew right away that Lettie and Martha had switched places. She thinks that a match between Lettie and Howl would help Lettie advance her magical career, but there is another suitor of whom Lettie is fond. Unfortunately, the Witch of the Waste has cursed him.
Michael and Sophie return to the castle where Sophie tries to help him with a spell Howl told him to practice. It appears to be a riddle, but neither can solve the puzzle. They believe it may be asking him to catch a shooting star. Using the magic boots, they chase a falling star, but it is so terrified that when they catch up to it, they let it go.
Howl returns and realizes that the spell Michael has been working on is not a spell at all. He hints that catching a falling star can be very dangerous. Howl then takes Sophie and Michael with him to the unnamed land that can also be accessed through the castle door. It turns out to be modern-day Wales, the land where Howl formerly lived.
His sister and her family still live there, but Howl is considered a prodigal. He discovers the “spell” Michael had was actually his nephew’s poetry homework. Howl, Sophie and Michael visit the nephew’s teacher in order to learn the rest of the poem. Howl is terrified when he discovers that the poem completes the rest of the Witch of the Waste’s curse. Immediately Howl appears to fall in love with Miss Angorian, his nephew’s teacher. He begins to woo her instead of Lettie.
Howl brings Sophie, pretending to be his mother, to talk to the king. First, she meets Howl’s mentor, Mrs. Pentstemmon. The old witch recognizes Sophie as a fellow witch, one who can speak life into objects. She begs Sophie to break the contract between Calcifer and Howl as it is turning Howl evil. It is the same thing that happened to the Witch of the Waste. Sophie then tries to blacken Howl’s name before the king, but that only convinces him that Howl is the man to face the Witch of the Waste.
A new resident comes to the castle. It is Lettie’s other suitor. The Witch of the Waste has cursed him into being a dog, the same dog Sophie had earlier freed. Lettie sent him to keep an eye on Sophie.
The Witch of the Waste finds Howl and the two have a magical battle over the town of Porthaven. Howl moves the castle to Market Chipping, to Sophie’s former hat shop. Now she will sell flowers rather than hats.
During the move, Sophie deciphers that Calcifer was once a falling star. Calcifer tells her that he had been terrified of dying so Howl offered to keep him alive the same way humans are kept alive, but he cannot tell her more than that.
Midsummer Day dawns. It is the deadline for the Witch of the Waste’s curse on Howl. Sophie’s family arrives unexpectedly. Fanny has come to tell her of her new wealthy husband and offer Sophie a home with them. Michael brings Martha to visit, and Lettie and Mrs. Fairfax also come to the castle.
Calcifer cries out that the Witch of the Waste has found Howl’s family in Wales. Howl hurries to save them. When Miss Angorian comes, Sophie sends her outside to look at flowers. The scarecrow arrives and delivers a message from the Witch of the Waste. She tells them that she has kidnapped Miss Angorian, and Howl must surrender or she will die.
Sophie uses the magic boots and runs to the witch’s castle. Once inside, she learns that the witch has taken parts of Prince Justin and Wizard Suliman to create a new man. She wants Howl’s head so she will have the perfect king to rule with her. The scarecrow arrives and battles with the witch. Howl appears and destroys what is left of the witch, but her heart remains with her fire demon, which they realize is in Howl’s home, disguised as Miss Angorian.
They find her taking Howl’s heart out of Calcifer’s flame, causing Howl to collapse and Calcifer’s fire to dwindle. Sophie enchants her walking stick to beat Miss Angorian, and she drops the heart. Sophie takes Calcifer in her hands and wishes that he would live another 1,000 years before she sets him free. She then replaces Howl’s heart into his chest. Howl awakens and defeats the Witch of the Waste’s fire demon.
At the demon’s death, its curses are undone. The scarecrow and the dog return to being Prince Justin and Wizard Suliman. Wizard Suliman wants to take Lettie on as an apprentice. Sophie’s youth returns. Howl and Sophie never admit their love, but he does say that they should live happily ever after together.