The story takes place in 2010 in Koganei, western Tokyo and like the novel revolves around a group of “tiny people” who are 10 cm tall and live under the floorboards of a typical human household.
A boy named Shō arrives at the house his mother lived in as a child, to live with his great aunt Sadako. When Shō leaves the car, he sees a cat trying to attack something in the bushes, but the cat leaves after being attacked by a crow. Shō goes to see what the cat was trying to attack. He then sees a Borrower named Arrietty.
That night Arrietty’s father Pod takes Arrietty above the floorboards to show her how he gets sugar. Their first stop is the kitchen, then they walk within a wall to reach a dollhouse in Shō’s bedroom, to get tissue. Before Arrietty and Pod can leave, Arrietty notices Shō is awake, and accidentally drops the sugar cube they got. Shō tells them not to be afraid of him.
Te next day, Shō leaves the dropped sugar cube beside an underground air vent where he first saw Arrietty, but Arrietty’s mother Homily warns them not to take it because their existence must be kept secret from humans. Still, Arrietty sneaks out to visit Shō in his bedroom, and the two become friends. On her return, Arrietty is intercepted by her father. Pod and Homily realize they have been discovered, and decide the family must move out of the house.
Shō learns from Sadako that his ancestors have seen Borrowers in this house, and they had the dollhouse made especially for the Borrowers, with working electric lights and ovens. However, the Borrowers had not been seen since, and the dollhouse stayed in Shō’s room. Shō uncovers the floorboards above the Borrower household, uproots their kitchen and replaces it with the kitchen from the dollhouse.
Pod returns injured from a borrowing mission, helped by Spiller, a Borrower boy he met on the way. Spiller suggests some places the Borrowers can move to, and, after he recovers, Pod goes to check them out. Arrietty goes to say goodbye to Shō. During their subsequent conversation Shō theorises that the Borrowers are becoming extinct, which hurts Arrietty. Apologising, Sho reveals he has had a heart condition since birth, and will have an operation in a few days. The operation does not have a good chance of success.
Meanwhile Haru, Sadako’s maid, notices the floorboards have been disturbed. While Sadako is out, Haru locks Shō in his room, unearths the Borrowers’ house and puts Homily in a jar in the kitchen. Haru calls a pest removal company to smoke out the Borrowers and bring them to her alive. When Arrietty returns to find Homily missing and their house disturbed, she goes to Shō for help. Arrietty helps Shō break out of his locked room, Shō then carries Arrietty to the kitchen and distracts Haru while Arrietty rescues Homily. Sadako returns soon after the pest removal company comes, and tells them to leave.
Haru tries to prove to Sadako the Borrowers really exist, but Homily has escaped, and there is nothing below the floorboards: The Borrowers have already set off on their move, and Shō has destroyed the remains.The Borrowers stop for dinner during their move, and Shō’s cat spots Arrietty. The cat brings Shō to Arrietty. He gives her a sugar cube as a parting gift, and tells her the Borrowers’ fight for survival has given him hope to live through the operation, which will happen in two days’ time. In return, Arrietty gives Shō her hairclip. The Borrowers then go into a teapot, which Spiller steers down a river.