A young girl rescues a mysterious cat from traffic and soon finds herself the unwelcome recipient of gifts and favors from the King of the Cats, who also wants her to marry his son, Prince Lune. With the assistance of a fat, grouchy real cat and a an elegant cat statuette come to life (both characters featured in Studio Ghibli's earlier anime "Whisper of the Heart"), the girl visits the Cat Kingdom and narrowly escapes again.

When her father enlists to fight for the British in WWI, young Sara Crewe goes to New York to attend the same boarding school her late mother attended. She soon clashes with the severe headmistress, Miss Minchin, who attempts to stifle Sara's creativity and sense of self-worth. Sara's belief that "every girl's a princess" is tested to the limit, however, when word comes that her father was killed in action and his estate has been seized by the British government.