Following a desperate suicide attempt triggered by the tragic death of her terminally ill mother in a house fire, Anna Ivers (Emily Browning) is released from a psychiatric hospital after spending ten long months there. Haunted by recurring nightmares from that fateful night, Anna is unable to recall the details of the fire. Upon her return home, she reconnects with her older sister Alex (Arielle Kebbel), only to discover that their father Steven (David Strathairn) has a new partner, Rachel Summers (Elizabeth Banks), who was previously their mother’s live-in nurse.
As the sisters grapple with their mother’s death, they theorize that Anna's nightmares might be her mother's way of communicating that Rachel is responsible for her demise, intending to eliminate her to be with Steven. Their anger towards Steven grows, stemming from their belief that his decision to move their mother into the boathouse when she fell ill was selfish, as it left her to signal for help with a bell Rachel strapped to her wrist.
Anna's boyfriend, Matt (Jesse Moss), reveals he witnessed the tragic events surrounding her mother’s death, but their conversation is abruptly interrupted by Rachel. In an effort to uncover the truth, Anna joins Rachel on a trip into town, allowing Alex time to rummage through Rachel’s belongings and discover clues. They formulate a plan to meet with Matt later that night, but their hopes are shattered when he fails to arrive. Instead, Anna experiences a horrifying vision of him, and the following morning, his lifeless body is found, submerged in water with a broken back, leading the police to conclude it was an accident.
The sisters grow increasingly suspicious of Rachel, discovering that they cannot find any record of her with the State Nursing Association. Their investigation leads them to believe that Rachel might be Mildred Kemp, a cruel nanny who previously murdered children in her care after developing a dangerous obsession with their widowed father. When Steven leaves on a business trip, the sisters attempt to gather proof of Rachel’s alleged wrongdoing. However, their efforts are thwarted when Rachel catches them and sedates Alex, forcing Anna to flee to the local police station. Unfortunately, the officers do not believe her, and soon Rachel arrives to sedate Anna and take her back home.
Back at the house, as Rachel tucks Anna into bed, Anna sees Alex standing in the doorway with a knife before losing consciousness. Upon waking, she discovers that Alex has killed Rachel and disposed of her body in a dumpster. When Steven returns home, Anna franticly claims that Rachel attempted to murder them and that Alex heroically intervened. A bewildered Steven questions Anna’s account, leading to a devastating revelation: Alex perished in the fire alongside their mother. With horror, Anna looks down to find a bloody knife in her own hand, setting off a spiral of realization. She then comes face to face with the truth of that night and the guilt that has plagued her—after witnessing Steven in a compromising situation with Rachel, Anna had acted on her rage and inadvertently caused the fire that took her family from her.
Further revelations about Anna’s mental state surface, illustrating her struggles with severe schizophrenia and dissociative identity disorder. Flashbacks depict how Anna has been imagining Alex’s presence since her discharge, leading to tragic consequences, including the truth about Matt’s demise at her hands and the misunderstanding surrounding Rachel’s character—she was not a murderer, but a compassionate figure attempting to salvage the family dynamic.
As Anna is taken into custody the following morning, the police interrogate Steven, who divulges that Rachel changed her last name to escape an abusive relationship, revealing her true identity as Rachel Worshinsky. The story concludes as Anna is returned to the mental institution, where she encounters the patient in the adjacent room, now known to her as the real Mildred Kemp.
