In May 1939 Berlin, nineteen-year-old Sofie Baumann sits in her father's library, reluctant to leave home. Her elder sister Rachel, who raised Sofie after their mother's death, insists she must go. Sofie has secured a British work visa tied to domestic service, requiring her to take a housemaid position with the Wainwright family. Rachel's own visa fell through, so Sofie travels alone, with Rachel promising to follow alongside their neighbor Frederick. Their father refuses to leave, unwilling to abandon their mother's grave. On the train, Nazi police board and order all Jews to identify themselves. An elderly nun hides Sofie by draping a shawl over her head and presenting her as a novice, and a passenger who spotted Sofie's yellow star does not betray her. Sofie crosses the border safely while other Jewish passengers are marched off the platform.
Over a year later, in August 1940, twenty-six-year-old Juliet Lansdown arrives in London's Bethnal Green to work as deputy librarian, a position she views as her escape from cold, controlling parents who discouraged her education. The grand Victorian library is nearly empty under the rigid Mr. Pruitt, the head librarian, who resents having a female deputy and warns that the council may close the branch. Juliet lodges with Mrs. Ottley, a kind Women's Voluntary Service (WVS) volunteer. Her fellow lodger is Sebastian Falconbury, a young man from her home village who was injured in France and now works at the War Office while volunteering for the Air Raid Precautions (ARP) service. Juliet confides that her fiancé, Victor Manning, went missing at Dunkirk, but she conceals the deeper truth: Victor was reported absent without leave and treated as a deserter.
Katie Upwood, an eighteen-year-old library assistant, receives devastating news: Her boyfriend Christopher, who enlisted at eighteen, has been reported missing in action, presumed dead. Meanwhile, Sofie endures grueling conditions under Mr. Wainwright, a bullying employer who exploits the fact that her visa depends on his employment. When Wainwright sends her to the library, she meets Juliet, who gives her a library card and invites her to a new book club.
Working around Mr. Pruitt, Juliet secretly organizes a Library Book Club on Saturdays. The first meeting draws the Miss Ridleys (Irene, a retired headmistress, and Dorothy, a former nurse), Marigold Saxby, a flamboyant former singer with black-market contacts, Mrs. Ottley, Katie, and Sofie. Sofie shares her account of Nazi book burnings, and Marigold offers to help locate Rachel. The group forms the nucleus of a close-knit community.
Weeks later, Katie discovers she is pregnant. Facing ostracism and the loss of her university place, she visits a backstreet abortionist but flees in horror. When her mother discovers the truth, she devises a plan to pretend to be pregnant herself so Katie's baby can be passed off as Katie's sibling. Katie must abandon university and stay hidden.
Desperate to pay for information about Rachel, Sofie steals a ring from Wainwright's late wife's jewelry and pawns it. In September 1940, massive air raids strike London, and Juliet joins the growing movement of Londoners sheltering in Underground stations. She begins reading novels aloud and lending library books, planting the seed of what will become the Underground Library. In the station's service passages, Sofie meets Mac, a young Polish-Jewish refugee who survives through black-market work. Mac tells her that a Rachel Hoffman applied for a Portuguese visa in Bordeaux, suggesting Rachel married Frederick and giving Sofie her first lead. Juliet also volunteers as an ambulance driver, confronting the war's horrors firsthand.
Through shared meals and deepening conversations, Juliet and Sebastian develop a strong emotional bond. He takes her dancing at a jazz club in the Ritz's cellar, where they open up about their pasts, but Sebastian kisses only her cheek at the door, leaving their relationship undefined.
Wainwright traces the missing ring to the pawnbroker, who betrays Sofie. Police arrest her and send her to an internment camp on the Isle of Man, where she recovers her strength and writes to Mrs. Bloom, a contact in a Jewish network who may help trace Rachel. Juliet arranges a translation job for Sofie through Sebastian, and the Miss Ridleys persuade Wainwright to drop the charges. Sofie returns to London, moves in with Dorothy, and begins translating Allied broadcasts to expose Nazi propaganda. Mac, also released, takes classified war work.
A bomb crashes through the library dome while Juliet is inside, and Sebastian pulls her to safety. Juliet proposes moving the surviving books into the Underground station and, without waiting for approval, enlists volunteers to establish the Underground Library in a connecting passage. It becomes a thriving community hub with reading hours, a book club, and a children's section.
Irene establishes an Underground School and designates Katie as the teacher, giving Katie new purpose. When a bomb strikes a water main, however, floodwater pours into the tunnels. Irene is knocked unconscious in the rising water and dies despite rescue efforts. The loss devastates the community.
Sofie becomes Dorothy's primary companion, forming a surrogate family. Mac retrieves Sofie's mother's gold bracelet from Wainwright through a ruse and presents it to Sofie, deepening their bond.
Katie's contractions begin unexpectedly. Her mother tries to force her into the Ridleys' Anderson shelter, a corrugated-steel backyard air-raid shelter, to give birth in secret, but Katie refuses and runs to the Underground clinic during an air raid, where she delivers a healthy boy she names Johnny.
Victor Manning reappears, claiming he was wrongly identified as a deserter and received an honorable discharge. He urges Juliet to return to their home village of Upper Beeding and marry him. Torn between obligation and her London life, Juliet agrees, parting painfully from Sebastian and leaving him a heartfelt letter confessing she dreamed about him.
At Victor's remote cottage, Juliet finds his ration book under a false name and realizes he is a deserter in hiding. When she tries to leave, Victor becomes aggressive, but police, alerted by Sebastian's mother, Mrs. Falconbury, arrive and arrest him. Juliet returns to London and resumes her role.
Sofie and Mac visit Mrs. Bloom's network, which confirms Rachel reached Lisbon with Frederick. Dorothy agrees to sponsor their work visas. Katie returns from a maternity home and reconciles with her mother, whose husband has left the family. She moves home to care for her injured mother while Mrs. Ottley provides daily childcare.
Mr. Pruitt pushes the council to close the Underground Library, but during the inspection a crowd organized by Marigold floods in carrying borrowed books. The councilor overrules Mr. Pruitt and appoints Juliet as head librarian, the first woman in the role. That evening, Sebastian finds Juliet in the library and confesses he has been dreaming about her too. They kiss for the first time and acknowledge their love.
Rachel and Frederick arrive in London, reuniting with Sofie at the Underground Library. Katie receives a telegram revealing Christopher is alive in an Italian prisoner-of-war camp. Sofie and Mac confess their love. On Christmas evening, the community gathers for a combined Christmas and Hanukkah celebration. Juliet declares that libraries are about people and connection, and that a free library cannot be taken for granted when books are being burned across Europe. Sebastian and Juliet, now engaged, dance together as the celebration continues around them.