In 1952, we follow the story of Therese Belivet (Rooney Mara), a shop-girl with dreams of becoming a photographer. While working in Frankenberg's department store in Manhattan during the bustling Christmas season, she spots a stunning woman named Carol Aird (Cate Blanchett) eyeing a model train set. After Therese helps Carol pick a set to gift her daughter, their casual conversation leads to a connection that transcends mere chance. When Carol accidentally leaves behind her gloves, Therese decides to return them, sending them along with a sales slip bearing Carol's name and address.
Meanwhile, Therese is caught in an ambivalent relationship with her boyfriend, Richard (Jake Lacy), who dreams of moving to France and marrying her. However, she feels a tug of uncertainty about their future. A common friend, Dannie (John Magaro), introduces Therese to the world of photography at The New York Times, but a kiss with him leaves her uneasy, prompting her to seek solace elsewhere.
On the other side of the story, Carol faces the turmoil of a difficult divorce from her dismissive husband, Harge (Kyle Chandler), who is intent on gaining custody of their daughter, Rindy. Carol reconnects with Therese, inviting her to lunch as a thank you for the returned gloves. Their lunches turn into secret meetings, culminating in a Christmas invitation to Carol's home in New Jersey, where Therese captures candid moments of Carol including one as she selects a Christmas tree.
However, their blossoming relationship faces challenges, notably when Harge shows up unexpectedly. Tensions rise, and after arguments blow up, Carol drives Therese to the train station, only adding to the turmoil. Later, reaching out to apologize, Carol brings Therese a gift — a Canon camera — which symbolizes newfound hope.
As Carol contemplates escaping the looming threat of a custody battle, their bond deepens, leading the pair to embark on a road trip. With Richard sensing the emotional shift in Therese, their relationship crumbles, but Therese finally indulges in her feelings for Carol during an intimate moment in a motel on New Year’s Eve. Tragically, the situation turns when they discover that a traveling salesman, Tommy Tucker (Cory Michael Smith), is a private investigator working for Harge.
When Carol realizes that Harge has been gathering evidence against her, she confronts Tucker with a gun, but the damage is already done. As Carol fights for custody, she leaves Therese heartbroken after a silent phone call—both women understanding the gravity of their situation.
Despite the struggles, Therese channels her pain into her photography, eventually landing a job at The New York Times. As Carol confronts her legal battle, she bravely accepts the consequences of her truth, willing to sacrifice for her daughter’s well-being, even granting Harge custody.
Eventually, seeking to reconnect, Carol invites Therese out at the Ritz Tower Hotel, unveiling plans for a new chapter in her life. With dreams of sharing an apartment, Carol expresses her love but is met with silence as Therese grapples with her decision. The emotional tension intensifies during a fleeting encounter where their eyes meet, culminating in a moment where time seems to stand still, as they both contemplate their paths that may once again intertwine.
