Anne Shirley, Megan Follows dreams of becoming a writer after two years teaching at Avonlea, but her story “Averil's Atonement” is rejected by a magazine. Her best friend Diana Barry, Schuyler Grant, has become engaged, and Marilla’s eyesight has also improved, Colleen Dewhurst opening an opportunity for Anne to follow her ambitions, which have been on hold since giving up the Avery Scholarship.
Anne’s misadventures in Avonlea continue. Unbeknownst to her, Diana submitted “Averil's Atonement” into a contest to introduce the new Rollings Reliable baking powder to the public, and it wins first prize. Anne is grateful to her friend for trying to boost her spirits, but finds the widespread recognition humiliating. She later sees her jersey cow Dolly in Rachel Lynde's field, which she had promised would never happen again. After unsuccessfully trying to get Dolly back to her field, Anne sells the cow to Gilbert Blythe, Jonathan Crombie and his father. She laments about her “Jonah day” to Marilla, who offers encouragement and plum puffs, only to discover she had actually sold Rachel's cow instead of her own. When she and Marilla pay a visit to the Lyndes to explain her mistake, Rachel's ailing husband Thomas passes away, which Rachel fears will force her to sell her farm and leave Avonlea.
At a clambake for Diana's engagement, Gilbert Blythe, Jonathan Crombie proposes to Anne, but she rejects his offer, convinced that their marriage would be unhappy and unsuccessful. At Diana's wedding, she sees Gilbert with a young woman named Christine Stuart. Gilbert insists they are just friends, and offers to wait for Anne, but she affirms she will never marry. Back at Green Gables, Marilla reveals that Rachel will be moving in with her. Anne decides to accept a job offer from her former teacher, Miss Stacey, as an English literature teacher at Kingsport Ladies' College in New Brunswick.
Anne initially finds her job difficult. Kingsport is dominated by the wealthy Pringle family, who resent that she received the position over one of their own. The students in her class, led by Jen Pringle, delight in causing trouble to make Anne look like a bad teacher. Anne must also endure the cold and sarcastic principal of Kingsport Ladies' College, Katherine Brooke, Rosemary Dunsmore. She grows close to Emmeline Harris, a bright student whose widowed father, Morgan Harris, Frank Converse Anne had encountered previously. After Anne and Emmeline cause a disturbance, angering Katherine, Morgan withdraws both his daughter and his financial support from K.L.C. and confines Emmeline with her stern grandmother Margaret Harris and repressed aunt Pauline at their mansion, Maplehurst. Anne convinces Mrs Harris to let her tutor Emmeline at home, and let Pauline attend a friend's wedding anniversary overnight. Meanwhile, Anne and Miss Stacey organize a play to raise money for the school, with Jen Pringle playing the lead role of Mary, Queen of Scots. When Jen calls off sick on the day of the show, Anne convinces Morgan to let Emmeline star in the play, which they have been rehearsing during tutoring sessions. The show is a success and Anne finally wins the Pringles' support. After returning from a trip to Boston with the Harris family, she runs into Gilbert and finds out that he is engaged to Christine Stuart. Encouraged by Gilbert to try writing about her home town, she publishes a series of short stories entitled Avonlea Vignettes. During a hospital benefit ball, Morgan asks her to marry him, which she declines.
After Mrs Harris dies, Pauline accepts a marriage proposal and Morgan decides to sell Maplehurst and return to Boston with Emmeline. Anne resigns from K.L.C. and persuades Katherine to come back to Avonlea with her for the summer holidays. Upon arriving at Green Gables and meeting Diana's new baby, Anne discovers that Gilbert has fallen ill with scarlet fever, which he contracted at medical school in Halifax. Finally realizing her true feelings for Gilbert, Anne rushes to his bedside, where he tells her that he has called off his engagement to Christine because Anne is the only one for him. After recovering, he proposes once more, and Anne accepts him with a kiss.
