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Matilda is born to negligent parents, Harry and Zinnia, who prioritize their own self-interests over her well-being. Despite their neglect, Matilda demonstrates remarkable intelligence from a young age, teaching herself to read and perform complex calculations. Her parents, unimpressed, discourage her intellectual pursuits, leading Matilda to seek knowledge independently at the local library, where she befriends the librarian, Miss Phelps.

Frustrated by her father's mistreatment, Matilda discovers she possesses telekinetic powers. She uses these powers to play tricks on her father, Harry, such as dyeing his hair and gluing his hat to his head. Her powers escalate during an argument with her father, causing a television to explode.

Matilda enrolls in Crunchem Hall Elementary School, much to her delight. However, she discovers the school is run by the tyrannical headmistress, Miss Agatha Trunchbull, who terrorizes the students. Matilda finds a kind and supportive teacher in Miss Jennifer Honey, who immediately recognizes Matilda's exceptional intelligence.

Matilda accidentally uses her telekinetic powers at school to make a glass fall, frightening Miss Trunchbull. She confides in Miss Honey about her abilities. Miss Honey then reveals her own tragic past: she was orphaned and raised by her cruel aunt, Miss Trunchbull, who stole her inheritance, including their family home.

Matilda and Miss Honey visit Miss Trunchbull's house, hoping to retrieve some of Miss Honey's old belongings. They narrowly escape Miss Trunchbull's detection. Later, Matilda uses her powers to retrieve a beloved toy and chocolates for Miss Honey. She also uses her powers to scare away police officers who were attempting to investigate her father's illegal activities.

During a terrifying encounter where Miss Trunchbull confronts Matilda about a hair ribbon found at her house, Matilda uses her telekinetic powers to make chalk write on the blackboard, posing as Miss Honey's deceased father. The message demands Miss Trunchbull return Miss Honey's house and leave town. Terrified, Miss Trunchbull faints, then is driven out of the school by the students, never to return.

With Miss Trunchbull gone, Miss Honey becomes the new headmistress, and her family home is restored. Matilda's parents, facing legal trouble, prepare to flee the country. Matilda expresses her desire to stay with Miss Honey, and her parents, indifferent as ever, sign adoption papers. Matilda finally finds the loving and supportive family she always deserved with Miss Honey, and they live happily ever after.