The story concerns Lady Windermere who discovers that her husband may be having an affair with another woman. She confronts her husband but he instead invites the other woman, Mrs Erlynne, to her birthday ball. Angered by her husband's unfaithfulness, Lady Windermere leaves her husband for another lover. After discovering what has transpired, Mrs Erlynne follows Lady Windermere and attempts to persuade her to return to her husband and in the course of this, Mrs Erlynne is discovered in a compromising position. She sacrifices herself and her reputation in order to save Lady Windermere's marriage. Mrs. Erlynne was originated by Marion Terry.
Numerous characters in the play draw their names from places in the north of England: Lady Windermere from the lake Windermere, the Duchess of Berwick from Berwick-upon-Tweed, Lord Darlington from Darlington.
Following the departure of the Duchess and her daughter, Lady Windermere decides to check her husband's ledger book. She finds the ledger in a desk and consults it to find that nothing appears amiss, though when she returns it to its place she finds another ledger book there; one with a lock. After prying the lock open, she finds it records large sums of money being given to Mrs Erlynne. Lord Windermere enters to discover his wife has been looking at this ledger book. She confronts him and he cannot deny that he has had dealings with this woman, though he states that he is not betraying her, only trying to protect her from something that would cause great shame to her. He then requests that she send Mrs Erlynne an invitation to her birthday ball that evening. Lady Windermere refuses, but Lord Windermere insists and writes out an invitation himself. Lady Windermere states that she will make a scene if Mrs Erlynne appears to which Lord Windermere responds that it would be in her best interest not to do so.
Lady Windermere and Lord Darlington discuss the situation of Mrs Erlynne's arrival and Lord Darlington, glad of the revelation that Lord Windermere invited her against Lady Windermere's wishes, takes advantage of Lady Windermere's tragic state and professes his love to her. Lady Windermere is taken aback by the revelation and further saddened when he announces that he will be leaving the next day and will likely never see her again. Lord Darlington sets her an ultimatum to try to convince her to take action immediately, while still in a state of shock. He begs her to join him abroad and then takes his leave. On the other side of the room Mrs Erlynne is discussing matters with Lord Windermere and she states that she intends to marry Lord Augustus but would require some money from Lord Windermere.
Lady Windermere, elated by Lord Darlington's confession and angered by Mrs Erlynne's presence, decides to leave the house at once leaving a note to Lord Windermere that she is leaving him. When Mrs Erlynne asks Parker where Lady Windermere has gone, he replies that she has left the house and has written a note to Lord Windermere. Upset by this, Mrs Erlynne opens the letter and in a brief monologue reveals that she is Lady Windermere's mother and she did a similar thing twenty years previously. She takes the letter and exits to find Lady Windermere to save her from the same mistake she made herself.
While the men are talking, Cecil Graham takes notice of Lady Windermere's fan (one given to her by her husband as a birthday present) lying on a table. He presumes, as do the others, that Lord Darlington presently has a woman visiting. As Lord Windermere rises to leave, Graham points out the fan to him. He is astonished to see his wife's fan and demands to know if Lord Darlington has her hidden somewhere and he refuses to leave until a search has been conducted. Lord Darlington refuses to allow a search and just as Lord Windermere asks again, Mrs Erlynne reveals herself so that her daughter may escape unseen by her husband. All of the men, especially Lord Augustus, are astonished and Mrs Erlynne explains that she must have taken Lady Windermere's fan by mistake.
Lady Windermere leaves the room to locate a photograph and Mrs Erlynne and Lord Windermere discuss the previous evening's events. The whole story is thus revealed: Mrs Erlynne left Lady Windermere's father for a lover shortly after her birth. Sometime later, the lover left Mrs Erlynne and she lived in poverty and under an assumed name. When it was announced that her daughter was to marry a wealthy man, she decided to blackmail Lord Windermere in order to make a living and possibly regain a position in society. Mrs Erlynne begs Lord Windermere not to reveal her true identity but asks that she be allowed to keep the fan. Lady Windermere returns with the photograph which she presents to Mrs Erlynne.
While Lord Windermere checks for the return of Mrs Erlynne's coach, she and Lady Windermere discuss the events as well and Mrs Erlynne pleads for Lady Windermere to not reveal the truth of the evening's events. Lady Windermere promises to keep the secret. As she begins to depart, Lord Augustus is announced. After he enters, Mrs Erlynne requests him to escort her to her carriage which he does. Lord Augustus returns with news that she has cleared up the events of the evening, has accepted his proposal of marriage and they will live outside of England. Both Lord and Lady Windermere keep their secrets.
A 2005 film adaptation, entitled A Good Woman, switched the setting to the Amalfi coast of Italy, made the Windermeres Mr. & Mrs., and updated the time frame to 1930. The film stars Helen Hunt, Mark Umbers, Scarlett Johansson, Stephen Campbell Moore, and Tom Wilkinson.