Young prodigy Matilda Wormwood (Mara Wilson) faces daily neglect and mistreatment from her parents, Harry (Danny DeVito), a grumpy and abusive car salesman, and Zinnia (Rhea Perlman), an overly cheerful parent obsessed with Bingo. Adding to her woes, her older brother Michael (Brian Levinson) bullies her relentlessly, dismissively calling her "dip-face." The Wormwoods are so immersed in their trivial lives that they fail to recognize Matilda's extraordinary intelligence. Left unsupervised at home, Matilda takes to cooking her own breakfast and frequently visits the public library, where she finds refuge in the fantastical realms of books.
When her parents obstinately refuse to send her to school, claiming she is only four when she is actually six and a half, Matilda decides to take matters into her own hands. She pulls off small acts of revenge, such as adding a bleaching agent to her father's hair tonic and gluing his hat to his head. The situation escalates when Harry angrily rips apart the library’s copy of Moby-Dick, deeming it inappropriate, which leads to a spectacular explosion of the television.
Harry's customer, the fearsome Miss Agatha Trunchbull (Pam Ferris), the tyrannical principal of Crunchem Hall Elementary School, eventually agrees to admit Matilda to school after Harry sells her a car. At school, Matilda befriends her teacher, Miss Jennifer Honey (Embeth Davidtz), who quickly realizes Matilda’s brilliance and advocates for her advancement. However, Trunchbull dismisses the idea, viewing Matilda as a troublesome child, despite Miss Honey's pleas to her parents about Matilda's potential.
Matilda soon uncovers a shocking truth: her father's illegal practices in selling cars have drawn the attention of undercover FBI agents, Bob (Paul Reubens) and Bill (Tracey Walter). However, her parents fail to take her concerns seriously, mistaking the agents for salesmen. Trunchbull retaliates against Matilda’s resilience by locking her in the Chokey, a nightmarish confinement. But when Trunchbull conducts an unexpected inspection of Matilda's class, Miss Honey bravely comes to her rescue.
In a clever prank, Matilda's friend Lavender ([Kiami Davael]) manages to scare Trunchbull by hiding a newt in her water jug. Matilda’s frustration at the injustices she faces leads her to unleash her telekinetic abilities to tip the glass over, splashing the newt on Trunchbull. Yet, when it's time to demonstrate her powers to Miss Honey, Matilda finds herself unable to do so, illustrating Miss Honey's insight that self-confidence is crucial.
During a heartfelt tea at Miss Honey's home, Matilda learns about her teacher’s tragic past: her mother died in a circus accident and her father was allegedly murdered by Trunchbull, who then took control of Honey's inheritance. When Matilda and Honey brave a mission to retrieve Honey's cherished belongings from Trunchbull's house, they narrowly escape capture.
With practice, Matilda hones her telekinetic gifts, using them to thwart the FBI agents while hoping to reach her father in time. As she puts her abilities to the test, Matilda seeks to reclaim Honey’s beloved doll and frighten Trunchbull by rearranging her living room. This culminates in a showdown, where Matilda cleverly writes a message on the blackboard, posing as the spirit of Miss Honey's father, Magnus, who calls out Trunchbull's wrongdoings.
Facing the fearsome wrath of Trunchbull, Matilda protects her classmates, ultimately leading the students to oust the oppressive principal from their lives for good. In the aftermath, Miss Honey reclaims her childhood home and Matilda finds a true family in her.
As time goes by, the Wormwoods arrive at Honey's house, intent on fleeing to Guam and believing the FBI agents are simply speedboat salesmen. Matilda stands her ground, refusing to leave with them, stating her desire to be adopted by Miss Honey. In a moment of clarity and growing remorse, both Zinnia and Harry sign the adoption papers, acknowledging their failings. Matilda, finally free from her past, embarks on a joyful new life where Miss Honey becomes the new principal of Crunchem Hall, fostering a nurturing environment for Matilda and her friends.
