The Hilliard family is fractured by divorce. Daniel Hilliard, an out-of-work actor, lives alone in a cluttered flat, while his three children, Lydia, the eldest; Christopher, the middle child; and young Natalie, live with their mother, Miranda, the Managing Director of Hilliard's Lighting Emporium. The children visit Daniel for Tuesday tea, a schedule Miranda controls tightly and Daniel resents bitterly.
On a typical Tuesday, the children arrive carrying one of Miranda's letters. They have already read it, opening and resealing the letter in a fresh envelope as a form of self-defense. Daniel makes bitter jokes about Miranda, miming violent fantasies with imaginary weapons whenever his temper rises. The letter reveals that Miranda plans to keep the children Friday night for Saturday shopping, cutting into Daniel's weekend. The children list their grievances: Miranda routinely invents excuses to shorten Daniel's time with them. Then Miranda phones with devastating news: The cat has killed Christopher's hamsters.
Daniel has also taken a job as a nude model at the local Art College, a fact the children already know because their next-door neighbor, Mrs. Hooper, attends the life class. The conversation turns to Miranda's plan to hire a cleaning lady for housekeeping and after-school child care. Daniel demands to know why the children cannot come to his flat instead. Christopher reveals they suggested it, but Miranda refused, saying it would disrupt her routine. Daniel proposes returning to court, but all three children refuse, remembering the previous experience as horrible and futile.
Miranda arrives 20 minutes early, forces open Daniel's locked front door, and sweeps through the flat with thinly veiled disapproval. She announces she is taking Christopher's quail, Hetty, home to replace the dead hamsters, and hands Daniel a newspaper advertisement for the cleaning lady to drop at the newspaper office. Daniel tries to ask her to let the children come to his flat after school, but he capitulates. As the children watch with beseeching faces, a plan strikes him. Using correction fluid, he changes the telephone number on the advertisement from Miranda's to his own, then seals the envelope.
Having redirected the inquiries to his own number, Daniel calls Miranda pretending to be different applicants. He makes the first three deliberately unsuitable: One refuses girls, another refuses boys, and a third considers the children too old. The fourth is warm and capable, insisting on wholesome food and claiming perfect reliability. She gives her name as Madame Doubtfire and arranges an interview.
At the interview, Natalie answers the door and finds a vast apparition in a salmon pink coat, a bulging turban pinned with safety pins, green rubber boots, and an enormous handbag. Madame Doubtfire takes Natalie upstairs, supervises tooth-brushing, and reads her the picture book
The Looking Glass River. When the light goes off, Natalie whispers, "Good night, Daddy." She has recognized Daniel. He makes her promise not to say a word. Lydia also recognizes her father and, giddy with excitement, endorses Madame Doubtfire enthusiastically. Miranda, relieved, offers the job.
Over the following weeks, each child develops a distinct way of coping with Daniel's dual identity. Lydia treats the situation with detached amusement. Christopher is protectively vigilant, flushing Madame Doubtfire's cigar stubs from the toilet before Miranda arrives. Natalie comes to treat Madame Doubtfire and Daniel as two entirely separate people, trailing behind the housekeeper and reporting what "Daddy says" as though he were someone else. The household transforms: Plants that had been dying since Daniel left now flourish, meals are nourishing, and fires blaze in the grate.
Miranda relaxes into the arrangement and begins confiding openly about her failed marriage, not knowing she is speaking to Daniel. She tells the story of their wedding day, when Daniel disappeared mid-ceremony and returned with a box of kittens to give to a stranger. Lydia grows suddenly angry, feeling it is deeply wrong that her mother is opening her heart without knowing she is talking to Daniel. Miranda also reveals that the art class must meet at her house the following Tuesday, where Daniel, as the nude model, will pose in her living room. She insists Madame Doubtfire be present to supervise, unaware she is asking Daniel to be two people at once.
Daniel takes the children to the theater, where a play about quarreling married couples profoundly affects Lydia and Christopher. Afterward, Christopher challenges Daniel: If acting is just a job, why couldn't Daniel have acted happy and stayed in the family? Daniel grabs Christopher by the collar and shouts that real life is not a performance. He cannot go through his days pretending to be a contented pig. He stayed in town with no prospects just to remain near his children. The children accept his reasoning, but Lydia raises a further problem: Madame Doubtfire is not really their father, so the disguise does not count as truly seeing him. Daniel warns that if Madame Doubtfire must go, the only alternative is "War. Total war."
Daniel writes Madame Doubtfire's letter of resignation and struggles through a chaotic final day of domestic duties, gaining new sympathy for Miranda's daily difficulties. But before the resignation takes effect, catastrophe strikes. A teachers' strike keeps the children home on the day the art class arrives to sketch Daniel nude in Miranda's living room. He cannot be both model and housekeeper, and he has forgotten to bring male clothing. Christopher fetches Miranda's paisley shawl as an improvised loincloth, and for an hour the arrangement holds. Then Daniel's eyes drift to the garden window, where his three children's faces are pressed against the glass, and behind them, Miranda is rushing up the path.
Miranda discovers Madame Doubtfire's clothing on her bedroom floor and confronts Daniel on the stairs. She accuses him of deception and humiliation; Daniel accuses her of driving them all to deception through her refusal to let him see his children. Lydia declares in an unsteady voice, "I hate you both," and walks into her bedroom. Christopher, in tears, tells both parents they are "disgusting and ugly," snatches up a weeping Natalie, and carries her away. Miranda, deeply shaken, tells Daniel to get out.
Daniel destroys Madame Doubtfire's wardrobe and scrubs his flat until it gleams, recognizing for the first time how squalid it had become. Lydia arrives alone, cold and unfriendly, insisting on coming because it is Tuesday and she considers it her right. She explains that the three children are the only lasting things to have come out of the marriage, and this gives them an "Extra Right": If Daniel and Miranda cannot work things out for the children's sake, the marriage was worse than total failure.
Miranda arrives with Christopher and Natalie. She and Daniel exchange tentative apologies. Miranda proposes a compromise: Daniel can work as her gardener in the late afternoons, which will naturally allow him to see the children after school. Daniel accepts immediately. They shake hands. After Miranda leaves, she phones to say Hetty the quail has died and asks Daniel to break the news to Christopher. They hang up laughing, the first sign of genuine warmth between them. Daniel sits with all three children and reads
The Looking Glass River aloud, the same book Madame Doubtfire read to Natalie on the first night. The two elder children grin at one another. Natalie squeezes his hand.