Anne Elliot is the overlooked middle daughter of the vain Sir Walter Elliot, a baronet who is all too conscious of his good looks and rank and spends excessive amounts of money. Anne's mother, a fine, sensible woman, is long dead, and Anne's elder sister, Elizabeth, resembles her father in temperament and delights in the fact that as the eldest daughter she can assume her mother's former position in their rural neighborhood. Anne's younger sister, Mary, is a nervous, clinging woman who has made an unspectacular marriage to Charles Musgrove of Uppercross Hall, the heir to a bucolic but respected local squire. None of her surviving family can provide much companionship for the elegant-minded Anne, who, still unmarried at 27, seems destined for spinsterhood.
After she met and fell in love with Wentworth, at age nineteen, Anne had been persuaded by her mother's great friend —and her own trusted confidante, the widow Lady Russell— to break the engagement. Lady Russell had questioned the wisdom of Anne marrying a penniless young naval officer without family or connections and whose prospects were so uncertain. Wentworth is left bitter at Lady Russell's interference and Anne's own want of fortitude.
Wentworth re-enters Anne's life when Sir Walter is forced by his own profligacy to let the family estate to none other than Wentworth's brother-in-law, Admiral Croft. Wentworth's successes in the Napoleonic Wars resulted in his promotion and enabled him to amass the then considerable fortune of £25,000 (around £2.5 million in today's money) from prize money awarded for capturing enemy vessels. The Musgroves, including Mary, Charles and Charles's younger sisters, Henrietta and Louisa, are delighted to welcome the Crofts and Wentworth to the neighborhood. Both Musgrove girls are attracted to Wentworth, though Henrietta is informally engaged to clergyman cousin Charles Hayter. Hayter is viewed as a merely respectable match, being a bit beneath the Musgroves, socially and financially. Charles, Mary, and the Crofts continually speculate as to which one Wentworth might marry. All this is hard on Anne, due to her regret at breaking off the engagement and Wentworth's constant attention to the Musgrove girls. She tries to escape their company as often as she can, preferring to spend time with her nephews.
Captain Wentworth's visit to a close friend, Captain Harville, in nearby Lyme Regis results in a day-long outing being organized by those eager to see the resort. Louisa Musgrove sustains a concussion in a fall brought about by her own impetuous behavior. This highlights the difference between the headstrong Louisa and the more sensible Anne. While onlookers exclaim that Louisa is dead and her companions stand around dumbfounded, Anne administers first aid and summons assistance. Impressed by her actions Wentworth realises his admiration for Anne had never left him and forces him to confront his feelings and actions as a result.
Louisa's recovery is slow and her self-confidence is severely shaken. Her newfound timidity elicits the kind attention and reassurance of Wentworth's friend Captain Benwick, who had been mourning the recent death of his fiancée. The couple find their personalities to be now more in sympathy and they become engaged.
Meanwhile, Sir Walter, Elizabeth, and Elizabeth's scheming friend Mrs. Clay, the widowed daughter of Sir Walter's agent, have relocated to Bath. There they hope to live in a manner befitting a baronet and his family with the least possible expense until their finances are restored to a firmer footing. Sir Walter's cousin and heir, William Elliot, who long ago slighted the baronet, now seeks reconciliation. Elizabeth assumes that he wishes to court her, while Lady Russell more correctly suspects that he admires Anne.
Although William Elliot seems a perfect gentleman, Anne distrusts him; she finds his character disturbingly opaque. She is enlightened by an unexpected source when she discovers an old school friend, Mrs. Smith, living in Bath in straitened circumstances. Mrs. Smith and her now-deceased husband had once been Mr. Elliot's closest friends. Having encouraged them into financial extravagance, he had quickly dropped them when they became impoverished. Anne learns, to her great distress, of his layers of deceit and calculated self-interest. In addition, her friend speculates that Mr. Elliot wants to reestablish his relationship with her family primarily to safeguard his inheritance of the title, fearing a marriage between Sir Walter and Mrs. Clay. This helps Anne to understand more fully the dangers of persuasion—in that Lady Russell pressed her to accept Mr. Elliot's likely offer of marriage—and helps her to develop more confidence in her own judgment.