Sara Crewe is a young girl who starts as a privileged student at Miss Minchin's boarding school in London. Her father, Captain Crewe, spoils her with lavish gifts and a private room. However, her life turns upside down when her father dies bankrupt, leaving her penniless. Miss Minchin forces Sara into servitude, making her work as a maid in harsh conditions.
Despite her hardships, Sara maintains her dignity and kindness, imagining herself as a princess in rags. She befriends other outcasts like Becky the scullery maid and shares stories to uplift their spirits. A mysterious neighbor, Mr. Carrisford, eventually discovers Sara's true identity—he was her father's business partner searching for her. The story culminates in Sara reclaiming her rightful inheritance, proving that inner nobility transcends external circumstances.