At the age of nine, Chiyo Sakamoto is taken from her poverty-stricken fishing village of Yoroido on the coast of the Sea of Japan with her older sister Satsu and sold to an okiya (geisha boarding house) in Gion, the most prominent geisha district in Kyoto. Perceived as less attractive in looks and demeanor, Satsu is not sold into the okiya and is instead forced into becoming a prostitute in Kyoto's pleasure district. Chiyo lives in the Nitta okiya alongside another young girl named Pumpkin, the elderly and grumbling Granny, money-obsessed Mother, and Auntie, a failed geisha. Also living in the okiya is the famous and ill-mannered geisha, Hatsumomo, renowned for her wickedness and dazzling beauty. She promptly takes to disliking Chiyo, whom she sees as a potential future rival who may threaten her place in the okiya and Gion, as well as Mother's financial dependence upon her earnings. Hatsumomo begins to go out of her way to get rid of Chiyo, even withholding the knowledge of Satsu's whereabouts in the pleasure district to make her do her dirty work and get blamed for it. This includes having Chiyo ruin an expensive kimono belonging to her more successful rival, Mameha, if she wants Hatsumomo to tell her where Satsu is. Auntie warns Chiyo against both angering and trusting Hatsumomo, knowing the ill-mannered geisha's true nature very well.
When Chiyo finds Satsu in the pleasure district, she conspires with her to escape from their new lives. Returning back to the okiya, she happens upon Hatsumomo engaged in intimate relations with her plebeian boyfriend, Koichi. This proves to be against the rules of the geisha lifestyle as it's a livelihood-threatening situation for a geisha whose air of unattainability is crucial to their allure. A furious Hatsumomo attempts to twists the situation and place blame for a fictional indiscretion on Chiyo. While Mother learns the truth from Chiyo and though she is punished, Hatsumomo is also banned from seeing Koichi again, increasing her hatred for Chiyo. Mother then orders the gates to be locked and bans everyone from leaving, except for nightly attendance with clients. Despite Pumpkin and Auntie's warning not to run away, Chiyo plans to leave the okiya and escape the city with Satsu, but is caught when she falls off the roof and breaks her arm. Enraged at her for dishonoring the okiya and incurring further medical costs, Mother stops investing in Chiyo and makes her pay off her increasing debts as a maid, rather than a geisha in training.
Several years later, a downtrodden Chiyo is given money and a handkerchief in the street by a strange but kind man known to Chiyo as the Chairman. She donates the money to the Yasaka shrine in Gion, praying to become a geisha in the hopes of entering an exclusive social sphere where she may have a chance of seeing him again, keeping the handkerchief as a memento. Chiyo becomes envious of Pumpkin, who is on her way to becoming a geisha under Hatsumomo's tutelage, while Chiyo still remains a maid under Mother. Pumpkin advances and is given her geisha name as Hatsumiyo, though Hatsumomo is dismayed that everyone still refers to her as Pumpkin. Soon afterward, at Granny's funeral, Chiyo is startled when Mameha takes an interest in her. Mameha persuades a reluctant Mother to reinvest in Chiyo's training, with Mameha acting as Chiyo's mentor and "older sister".
Mameha reveals that the source of Hatsumomo's hatred towards Chiyo comes from fear of Chiyo's beauty and cleverness, which contrasts with the simple-minded Pumpkin, who can be used by Hatsumomo to secure her position at the okiya. Because she cannot stand to have rivals, Hatsumomo has successfully ruined other geisha, including Hatsuoki (an old friend of Mameha's), a geisha who shared the same older sister as Hatsumomo and was driven out of Gion. However, despite her popularity, Hatsumomo is regarded as a failed geisha because she cannot obtain a danna to sponsor her independence after she angered the mistress of her principal teahouse, and has stayed in the okiya under Mother. Mameha also reveals that despite her financial contributions, Mother had refused to name Hatsumomo as the heiress of the okiya because she was afraid of the trouble she would bring if named. Everyone believes Hatsumomo would likely throw Mother out, sell off the okiya's kimono collection, retire and live on the money. Through Mameha's tutelage, Chiyo becomes an apprentice geisha with a new name: Sayuri.
As Sayuri gains popularity, a desperate Hatsumomo goes out of her way to ruin Sayuri by tarnishing her reputation in Gion to increase Pumpkin's popularity. This forced Mameha and Sayuri to devise a plan to push Hatsumomo out of the Nitta okiya lest Sayuri's career ultimately die. They arrange for Sayuri's mizuage (portrayed as a deflowering "ceremony" for maiko as a step to becoming full-fledged geisha) to be bidden upon by several influential men, namely Nobu Toshikazu, the president of Iwamura Electric as well as a close friend Ken Iwamura, who is revealed to be the Chairman; and reputed mizuage specialist "Dr. Crab", dubbed so by Sayuri due to his appearance. The plan is nearly ruined when Hatsumomo tells Dr. Crab that Sayuri has been deflowered, though Mameha successfully convinces him that Hatsumomo is a known liar and her words are too risky to trust. Dr. Crab ultimately wins the bid for Sayuri's mizuage and she uses his record-breaking payment to cover all of her debts. This leads Mother, who had been poised to adopt Pumpkin as her heiress, to choose Sayuri instead, ultimately destroying the two girls' friendship. This turn of events enrages both Pumpkin and Hatsumomo for different reasons: Pumpkin was looking forward to the adoption so that she could have some form of security in her old age while Hatsumomo was eagerly anticipating to Pumpkin's adoption so she could secure her own position as head geisha and drive the up-and-coming Sayuri out of Gion. Hatsumomo begins a downward spiral fueled by alcoholism and her behavior worsens past all excuse. After starting a brutal fight at a teahouse with a prominent kabuki actor in a drunken rage, Hatsumomo's future as a geisha and reputation in Gion is tarnished for good. She is eventually thrown out of the okiya permanently, never to be seen nor heard from again. However, Sayuri does hear rumors that Hatsumomo became a prostitute.
Eventually it is revealed Dr. Crab was actually bidding against the Baron, Mameha's danna, for Sayuri's mizuage. The Baron had previously tried to sexually assault Sayuri, undressing her against her will at a party, which Mameha had warned against. Nobu instead bids to become Sayuri's danna , but loses out to General Tottori. With Japan on the brink of entering World War II, many geisha are evacuated to other cities to work in factories, which requires hard labor and are primary bomb targets. The General is demoted and is unable to use any influence to send Sayuri somewhere safer. Despite losing respect for Sayuri, Nobu is able to send Sayuri far north to live with Arashino, a kimono maker. At the end of the war, Nobu visits Sayuri and asks that she return to Gion to help entertain the new Deputy Minister Sato, whose aid can be instrumental in rebuilding Iwamura Electric, the company which the Chairman and Nobu run. Once returning to Gion, Sayuri helps Mother and Auntie clean up the okiya and shows kindness to the new girl they have taken in to train under her. When she learns Mother has not invited Pumpkin back, having decided that she is a failure, Sayuri approaches an unhappy and homeless Pumpkin to help her entertain the Minister.
Sayuri, Mameha and Pumpkin entertain the Minister together regularly and within time, Nobu formally begins proposals to become Sayuri's danna . Sayuri still maintains strong feelings for the Chairman and doesn't want Nobu to become her danna , so on a weekend trip to the Amami Islands with Iwamura Electric, she plans to seduce the Minister and be caught in humiliation by Nobu. Upon catching on to Sayuri's plan and fearing that she would behave similar to Hatsumomo, Mameha warns against it because it would disrespect him and tells her to accept him as her danna . Sayuri refuses and asks Pumpkin for one last favor to bring Nobu to a theater while she is with the Minister, which Pumpkin agrees to. Pumpkin deliberately brings the Chairman instead of Nobu, which upsets Sayuri. Pumpkin reveals how she grown to resent Sayuri over the years - for destroying her chances of being adopted by Mother, being forced to become a prostitute and for never realizing how she made herself look bad to embarrass Hatsumomo and help Sayuri. Having noticed Sayuri's feelings for the Chairman, Pumpkin hoped the Chairman would become disgusted with Sayuri after seeing her with the Minister and Sayuri would be forced to accept Nobu as her danna .
When she meets the Chairman again, Sayuri confesses that her acts in Amami were for personal reasons. Chairman admits that he had feelings for her as well, but felt he owed Nobu, his best friend who had also saved his company, the chance to be with the woman that he had expressed a sincere interest in. However, the Chairman found out the truth from Pumpkin and told Nobu afterwards, Nobu refused to continue his pursuit of becoming her danna . Sayuri and the Chairman kiss, which she feels is her first kiss expressing true love.
Sayuri eventually retires from being a geisha and the Chairman becomes her danna . It is heavily implied that they have an illegitimate son together. Foreseeing the consequences this could have regarding the inheritance of Iwamura Electric, she relocates to New York City and opens her own small tea house for entertaining Japanese men on business in the United States. Sayuri severs her links to the Nitta okiya and in effect, Japan. The Chairman remains her danna until his death and the story concludes with a reflection on Sayuri and her life.