Sophie, an eighteen-year old hatter, is a responsible young woman who encounters a mysterious and tremendously powerful wizard named Howl while on her way to visit her younger sister Lettie. The Witch of the Waste, who romantically pursues Howl, comes to the hat shop and curses Sophie who refuses to serve her by transforming Sophie into a ninety-year old woman. Seeking a cure for the transformation spell, Sophie travels into the Wastes but instead finds a cursed living scarecrow whom she calls "Turnip Head", who takes her to Howl's castle. Here, Sophie meets Howl's young apprentice, Markl; and the fire-demon Calcifer, who is the source of all of the castle's energy and magical power. Calcifer offers to break the curse in exchange for Sophie's help in breaking the spell he's under, which keeps Calcifer bound to the house. When Howl appears, Sophie announces that she is the castle's new cleaning lady hired by Calcifer.
At the same time, Sophie's country is caught up in the beginning of a war with its neighboring country, following the mysterious disappearance of the other country's Crown Prince. Howl receives summons from the King, who orders his various assumed identities to fight in the war. However, Howl comes up with an idea to send Sophie, under the guise of being his mother, to the King to profess the cowardice of one of Howl's two aliases. Before leaving the castle, Howl gives to Sophie a magic charm (ring), which connects her to Calcifer and will guarantee her safe return. He also assures her that he will follow her to the palace in disguise. At the palace, Sophie runs into an asthmatic dog, Heen, who she thinks is Howl undercover. She also meets the Witch of the Waste, who Suliman, the king's magic advisor, punishes by draining all of her power, causing her to regress into a harmless old woman. Suliman tells Sophie that Howl will meet the same fate if he does not contribute to the war. As Sophie vehemently protests these measures, the Witch's spell temporarily weakens revealing Sophie's true form due to the passion in her words. Suliman realizes Sophie's true relation to Howl and her purely intense romantic feelings towards him. Howl then arrives to rescue Sophie under the guise of the King. Suliman tries to trap Howl but with the help of Sophie, they manage to escape, taking Heen and the former Witch of the Waste with them.
Sophie learns that Howl transforms into a bird-like creature in order to interfere in the war, but each transformation makes it more difficult for him to return to human form. Sophie fears that Howl is preparing to leave them, as his remaining time as a human is limited, he returns to interfering in the war. Sophie's mother—under Suliman's control—arrives and leaves behind a bag containing a "peeping bug" under her orders. The former Witch of the Waste discovers it and promptly destroys the bug by tossing it into Calcifer. Unfortunately, Calcifer gets sick after eating the bug, rendering him unable to protect the castle from being discovered due to his weakened state. Sophie's mother says Sophie can live with her again, but Sophie says she will stay with her new family.
A few hours later, Sophie returns to her young form just as the city is carpet bombed by enemy aircraft. Suliman's henchmen invade the flower shop Howl made for Sophie. After protecting the flower shop from the bombing, Howl draws the guards away just after healing Calcifer. He tells Sophie he is not going to run away anymore because he has something he wants to protect - Sophie. Afterwards, he takes his leave.