Giselle (Amy Adams) lives in Andalasia, an animated fairy tale world with talking animals and happy endings. Prince Edward (James Marsden), her designated true love, saves her from a troll and they plan to get married the next day. Queen Narissa (Susan Sarandon), Edward's evil stepmother, schemes to protect her throne, which she will lose once Prince Edward is married. She throws Giselle into a portal that transports her to the real world.
Giselle ends up in the middle of Times Square in New York City. After a number of misadventures, including causing a minor car accident, accidentally being caught in a crowd and getting on the subway, and having her tiara stolen by a homeless man in the Bowery, she meets Robert Philip (Patrick Dempsey), a hardened, yet friendly divorce lawyer. At his daughter Morgan's (Rachel Covey) insistence, Robert lets Giselle stay at their apartment. Following the ways of her fairy-tale world, Giselle recruits urban animals (of the breeds generally believed to be household pests) – pigeons, cockroaches and rats – to clean his apartment while she fashions a dress out of his curtains. Robert's girlfriend whom he was going to propose to, a fashion designer named Nancy (Idina Menzel), misunderstands the situation and runs off after arguing with Robert.
At Robert's law firm, his secretary Sam (Jodi Benson) tries to get Giselle back home, but is unsuccessful. Robert offers Giselle money, intent on going their separate ways at Central Park. However, Giselle immediately gives it to an old woman who remembers Edward stabbing an MTA bus in Times Square. Deciding that Giselle needs his protection, Robert rejoins her. While walking through the park, Giselle questions Robert on how he displays his affection for Nancy and helps Robert reconcile with Nancy by sending flowers to her, along with tickets to the King's and Queen's Ball.
Meanwhile Narissa's henchman Nathaniel (Timothy Spall) follows Prince Edward and his chipmunk Pip who have journeyed to New York to rescue Giselle. Nathaniel is given three poisoned apples, and is told to make sure Giselle takes a bite out of it. He makes his first attempt to kill Giselle as a vendor and hands her the apple as a caramel apple, but it fails when Giselle inadvertently throws the apple in the air and it gets lodged in a bicyclist's helmet, burning through his helmet and leaving a round bald spot on his hair. Nathaniel and the prince then spend a night at a motel, where Nathaniel questions his adoring but servile relationship with Narissa after watching a soap opera on the television. Finding Giselle and Robert at an Italian restaurant, Nathaniel serves her a poisoned apple martini while disguised as a waiter, but Pip foils Nathaniel's attempt. Angered by these failures, Narissa goes to New York to kill Giselle herself.
As Giselle and Robert spend more time together, Giselle discovers that the real world is much more complicated than she realized, while Robert is affected by her optimism and idealism. After a brief argument with Robert, Giselle realizes her own emotional growth and her growing feelings toward him. Edward continues to look for Giselle, eventually finding her at Robert's apartment. While Edward is eager to take Giselle home and marry, she insists that they first go on a date, which she has learned is customary in the real world. They end their date at the King's and Queen's Costume Ball. After Nancy and Prince Edward pair off to dance, Giselle dances with Robert. Giselle realizes that Robert is her true love as he sings the lyrics of the song to her. Edward and Nancy seem to realize the attraction between Giselle and Robert also discover a mutual attraction. Using her old hag's disguise, Narissa poisons Giselle, but her stepson thwarts her escape attempt.
Nathaniel exposes Narissa's plot and reveals that one must kiss Giselle by midnight to break the poison apple's spell. After Edward's kiss fails to wake Giselle up, Robert kisses her. Giselle comes out of her coma and admits that she knew Robert was her one true love. Narissa uses the distracting moment to break free. Deciding to write her own ending to the story, she transforms into a dragon. When Robert protects Giselle, Narissa takes Robert hostage, luring Giselle out the window and up to the top of the Woolworth Building to kill her. However, with Pip's involvement, Narissa falls to her death. Giselle catches Robert, and they save themselves from falling to their deaths.
Edward finds Giselle's discarded shoe and places it on Nancy's foot before they leave for Andalasia to get married. Giselle uses her magical dress-making talents to run a successful boutique shop, assisted by both humans and animals. Both Nathaniel (in New York) and Pip (in Andalasia) become successful authors, writing self-help books based on their experiences. The last scene shows Giselle, Robert, and Morgan playing and living together happily ever after.