The novel opens at the opera. Newland Archer enters his opera box and looks out across the theatre to see his lover, May Welland, touch the lilies he had given her. While dreaming of their future together, his thoughts are interrupted by gasps from the gentlemen sitting with him. They are whispering about a stylishly dressed woman who has just sat down in the box with May. Sillerton Jackson gasps, "I did not think they would have tried it on". In other words, he cannot believe that the Mingotts would allow the woman to come and sit in their box at the Opera. Newland becomes annoyed as he realises that everyone is paying attention to the box where his fiancée is sitting. He does not want the woman with whom he is engaged to be associated with a woman of questionable reputation. The strange woman is Ellen Olenska, a cousin of May. She has a bad reputation because she left her husband and ran off with his secretary. In New York Society, such behaviour was not accepted. Newland suddenly wishes to sit next to his girlfriend, as if to protect her from the gossip. He also has a sudden urge to announce their engagement because he wants to distract attention from the foreign woman and place attention on a happy event. He walks over to their box and is introduced to Ellen. Ellen explains that she remembers being kissed by him when they were little children and that returning to New York reminds her of her childhood. She imagines everyone appearing before her in their childhood underpants. Newland does not like her referring to New York society as being "a dear old place." He considers his society to be a grand institution and Ellen seems to be slighting this society.
After the Opera, everyone goes to the Beaufort's house for the annual ball. He keeps a huge room in his house dedicated solely to this annual ball. It is here that May announces to friends that she is engaged. Newland and May dance and, as is appropriate, sit alone in the conservatory where they sneak a kiss while no one is looking. Newland asks if Ellen has come to the ball; he hopes that she has not come because of her ill reputation. May replies that Ellen did not feel her dress was pretty enough to attend the ball, so she went home. Newland is glad that May understands propriety so well that she know when not to discuss the "real" reason why Ellen decided not to come: i.e. her bad reputation. As is customary for newly engaged people, Newland calls on Mrs. Welland and May and together they go to Mrs. Manson Mingott's home to ask her blessing for the marriage. Her home "lacks propriety" because her drawing room is on the same floor as the bedroom. To Newland's and May's relief, Ellen is not home. She has gone out shopping during the main "shopping hour" which lacks propriety as well. Mingott of course gives her blessing and encourages Newland and May to marry soon, "before the bubble's off the wine." As May, Newland and Mrs. Welland are leaving, Ellen returns with Beaufort. Newland apologises to Ellen for not having told her of the engagement at the Opera. Ellen understands that it is not proper to reveal such things in crowds. Ellen asks Archer to come and visit some time, but Newland thinks to himself how inappropriate such a visit would be.
Sillerton Jackson comes to dine with the Archers. Janey and Mrs. Archer want to hear the recent gossip on Ellen Olesnka. They began conversation discussing Mrs. Lemuel Struthers, who apparently was just a model for Mr. Struthers before they married. Then Ellen was discussed. Jackson said that she had not attended the ball and Mrs. Archer was glad of it. Janey ridicules Ellen's dress, and Mrs. Archer says that Ellen was bound to grow up strangely since she was permitted to wear black satin at her coming out ball. Newland defends Ellen and says that she should be able to act however she pleases since it is not her fault that she happened to have married a brute. Later, while the ladies retreat to work on a tapestry for May, the men smoke in the Gothic library. Newland remarks that "Women ought to be free." For the first time, Newland has doubts about his marriage. He feels that May's "innocence" is a contrivance of society, too fabricated to be real. He feels uncomfortable taking such an innocent woman as his wife, trading her blank page for his "page with a past." He worries that all the men around him of "perfect form" like Lawrence Lefferts lead horrible marriages of deceit and is worried that such a fate could become his own. After all, he has not confided any of his "real self" to May; perhaps they will always live their lives in secret from each other.
Then, the Lovell Mingotts decide to throw a reception for Ellen Olenska. But all the people of good society reject the invitation. So, Mrs. Welland tells this to Newland and Newland tells his mother. Mrs. Archer then goes to tell her friend Louisa van der Luyden, who is one of the most reputable women in New York society. Mrs. Archer and Newland discuss the problem of Ellen's reception with Mrs. Van der Luyden, who insists that she must discuss the problem with her husband. Mrs. Archer insists that Larry Lefferts discouraged everyone from coming in order to distract attention from his own affairs with women; Mr. Van der Luyden says that as long as the Mingotts have accepted Ellen into their family then everyone else should accept her into society as well. Since he and his wife cannot attend the dinner in the Leffertses place, due to Louisa's health, they instead invite Ellen to a reception dinner with the Duke of St. Austrey. This reception is of such high prestige that it exonerates Ellen of any marks on her reputation.
Ellen's parents had been avid travellers and they died early in Ellen's life. She lived with her aunt Medora Manson who was an eccentric. She would dress Ellen in crimson merino and amber beads and did not allow her to mourn for her parents as long as was "proper". She was the only young woman present at the reception for the Duke. After dinner, to many people's surprise, the Duke headed straight to Ellen where they talked for a while. Then, she left his side (which was an inappropriate thing for a woman to do) and sat next to Newland. Ellen asks if Newland's engagement to May was arranged or just romantic. Newland balks no marriages are arranged in America, he says. Upon getting up, she tells Newland that she expects him to visit her tomorrow after five p.m. (although no plans had been set). Then, there is a line of people ready to speak to Ellen; these are the same people that had rejected the invitation to meet her earlier.
Newland arrives at Ellen's home in the artist district at five after five. He had had a bad day; he felt like a "wild animal cunningly trapped" because he had been forced to go from home to home announcing his engagement to May. He does not tell May of his meeting with Ellen. When he gets to Ellen's home she is not there and he relaxes in her living room admiring her exotically decorated home. When she arrives, she explains that she had spent the day with Julius Beaufort looking for a new home because others do not find her home fashionable enough. Ellen is flippant about how she finds New York so safe like a little girl's paradise. Newland thinks that she should not be so naïve about how "powerful an engine" New York is and how she almost was crushed by it. She remarks how she had enjoyed the party at the van der Luydens; Archer says it's unfortunate that they do not "receive very often." Ellen, cleverly says, "Perhaps that's the reason for their great influence." They continue in this manner until the Duke of St. Austrey arrives with Mrs. Struthers. Struthers had not been invited to the Luydens' party and she had wanted to meet Ellen and invite her to a party at her home. Soon after their arrival, Newland leaves. On his way home, he stops at the florist to send May her daily lilies. He decides to send her the flowers; but he also sends an anonymous bouquet of flaming yellow roses to Ellen.
May and Newland go for a walk in the park. May thanks him for sending her flowers every day and remarks that it is nice that she gets them at different times of the day; it means he thinks each day to send her flowers, unlike Larry Lefferts who had a standing order for Gertrude's flowers to be sent each day. Newland tells May that he sent Ellen beautiful roses but May remarks that Ellen had not discussed them, although she had discussed flowers from other friends. Newland changes the subject and remarks that their engagement seems very long; May says that everyone else has had similarly long engagements. Newland feels like all of May's comments have been fed to her by others and wonders how long it will be until she can speak for herself. He worries that when he takes her bandage of innocence off her eyes, she won't be able to see anything. He suggests that they travel and May remarks that he is terribly original. Then Newland shouts, "Original? We're all like each other as those dolls cut out of the same folded paper." On the suggestion of elopement, May balks, "We can't behave like people in novels, though, can we?"
Later, Archer skips his regular trip to the club for fear that his life is becoming to repetitive and predictable. While he is reading novels in his study, Janey tells him that the Countess has gone to a party at Mrs. Struthers. This is horrible, of course, because Struthers is too "common". Newland remarks that he is "not married to Countess Olenska" and has nothing to do with her affairs. Luckily, Henry van der Luyden comes for a visit and does not blame Ellen for her attending the party. She probably just does not understand convention. Henry's nonchalance about the affair puts Mrs. Archer's heart at ease: decorum is still intact.
Newland is a junior lawyer and is asked by one of the senior partners, Mr. Letterblair, to advise Ellen Olenska in her divorce. Archer reads the papers and decides that Ellen should not divorce; but when he listens to Mr. Letterblair argue that she should not divorce, he realises how self-righteous he sounds and believes the best thing would be to talk to Ellen first before he unilaterally condemns her decision. Unlike the members of New York Society, Ellen has no fear of literature. Archer reflects on this fact and the fact that Ellen has the mysterious ability to "reverse his values" as he walks to her home. Newland walks through the snowy night and arrives at Ellen's home. Beaufort is there, trying to woo her away from her trip to Skuytercliff. Skuytercliff is the vacation home of the van der Luydens. Ellen tells Beaufort to leave because she has business with Archer. Newland is there to discuss the divorce. Newland encourages Ellen not to divorce because there is no way she can prove her innocence from a love affair after she left her husband. For this reason, she will be scandalised by the papers. Ellen agrees with Newland reluctantly.
On a crowded night at the Wallack's theatre, Newland Archer attends a showing of Shaughraun for the love of one scene: two lovers parting in silence. It reminds him of when he left Ellen the last time they were together: when they had discussed her divorce. On seeing the scene and remembering Ellen, Newland begins to cry and gets up to leave the theatre. As he is walking out, he sees Ellen; as he catches her eye, Mrs. Beaufort (sitting next to Ellen) calls Newland over. He sits behind Ellen and Ellen whispers, "Do you think he will send her yellow roses tomorrow." She was alluding to the roses that Newland had sent her. He says, "I was thinking that too." She says, "What do you do while May is away?" May is on vacation with her family in Florida. Newland is upset by the obviously suggestive question. She tells him that she has decided not to go through with the divorce because of him. Archer leaves the theatre reflecting on a letter that May had sent him. In the letter, May pointed out that Newland is the only one in New York that can truly understand Ellen and that he should take care of her because she is lonely and unhappy.