Marilla and Matthew Cuthbert, unmarried middle-aged siblings who live together at Green Gables, a farm in the village of Avonlea, on Prince Edward Island, decide to adopt a boy from an orphan asylum in Nova Scotia as a helper on their farm. Through a series of mishaps, the person who ends up under their roof is a precocious girl of eleven named Anne Shirley. Anne is bright and quick, eager to please and talkative, but dissatisfied with her name, her pale countenance dotted with freckles, and with her long braids of red hair. Although wishing she was named Cordelia, she insists that if you are to call her Anne, it must be spelt with an 'E', as it is "so much more distinguished." Being a child of imagination, however, Anne takes much joy in life, and adapts quickly, thriving in the environment of Prince Edward Island. She is something of a chatterbox, and drives the prim, duty-driven Marilla to distraction, although shy Matthew falls for her immediately.
The rest of the book recounts her continued education at school, where she excels in studies very quickly, her budding literary ambitions and her friendships with people such as Diana Barry (her best friend, "bosom friend" as Anne fondly calls her), Jane Andrews, Ruby Gillis, and her rivalry with Gilbert Blythe, who teases her about her red hair and for that acquires her hatred, although he apologizes many times. Anne and Gilbert compete in class and Anne one day realizes she no longer hates Gilbert, but will not admit it; at the end of the book, they both become very good friends.
The book also follows her misadventures in quiet, old-fashioned Avonlea. These adventures include her games with her friends (Diana, Jane and Ruby), her rivalries with the Pye sisters (Gertie and Josie) and her domestic mistakes such as dyeing her hair green. Anne, along with Gilbert, Ruby, Josie, Jane and several other students, eventually goes to the Queen's Academy and obtains a teaching license in one year, in addition to winning the Avery Prize in English, which allows her to pursue a B.A. at Redmond College.
The book ends with Matthew's death, caused by a heart attack after learning of the loss of all his and Marilla's money. Anne shows her devotion to Marilla and Green Gables by giving up the Avery Prize, deciding to stay at home and help Marilla, whose eyesight is diminishing, and teaching at the Carmody school, the nearest school available. To show his friendship, Gilbert Blythe gives up his teaching position in the Avonlea School to work at White Sands School instead, thus enabling Anne to teach at the Avonlea School and stay at Green Gables all through the week. After this kind act, Anne and Gilbert become friends.