In late 1950s Dairy, New Hampshire, the Berry children gather at bedtime to hear the story of how their parents, Win and Mary, met. While working summer jobs at the Hotel New Hampshire just prior to World War II, Win and Mary encountered an eccentric European named Freud, who travelled with a performing bear, “State O’ Maine.” Before returning to Europe, Freud urged Win and Mary to wed as soon as possible, and sold them State O’ Maine. They married and Win went off to war. When he returned, much had changed and the hotel closed. State O’ Maine, who Win had become very attached to, was shot by a boy in the woods. In the present, Win teaches at a second-rate preparatory school attended by his three oldest children, Frank, Franny, and John. Frank is aloof and studies taxidermy. Franny has a crush on a football player, Chip Dove, who bullies John. John and Franny are close, and John is sexually attracted to his sister. The Berrys have two younger children, Lilly, a dwarf, and a son named Egg. Win tells his father, Iowa Bob, the school’s football coach, that he finds his job unsatisfying. Frank taunts Franny and John about their relationship, and Frank and Franny brawl. Later, Chip Dove and a group of football players attack Frank. Franny and John rescue him, and Frank confesses he is gay. Meanwhile, Win tells Mary his plan to buy a closed girls’ school and turn it into a new Hotel New Hampshire. The family moves in and renovates the building. During the hotel’s grand opening, Iowa Bob is intoxicated and mocks his son’s ambitions. The following day, the hotel’s new waitress, Ronda Ray, invites John to visit her quarters. Franny and Frank encourage their brother to lose his virginity and listen on the intercom as he and Ronda Ray make love. On Halloween, Win and Mary take the Berry’s elderly, flatulent dog, “Sorrow,” to be put to sleep. That night, Chip and some fellow football players capture Franny and John. Chip promises to release John if Franny leaves with him and his friends. An African American player, Junior Jones, offers to help John save Franny with his fraternity brothers. The men arrive as Chip rapes Franny, but they chase him and the other players away. After the assault, Franny seeks her deceased dog, Sorrow. The following day, Iowa Bob is outraged when the school trustees delay Chip and the other players’ expulsion until after a big football game. John begins weight-training under his grandfather’s tutelage in order to protect Franny in the future. Meanwhile, Frank steals Sorrow’s body, intending to stuff it as a Christmas present for Franny. On Christmas Day, however, the stuffed animal falls out of a closet in the weight room, causing Iowa Bob to have a fatal heart attack. On New Year’s Eve, the Berrys throw a party, and Junior’s older sister, Dark Inge, teaches John how to properly kiss a woman. Later, John seduces Franny’s school rival, Bitty Tuck. However, Bitty faints when she sees Sorrow’s body stored in a bathtub. At the end of the evening, Junior makes love to Ronda Ray, and John rejects the advances of a singer, Doris Wales. Win receives a letter from Freud inviting him and the family to Vienna, Austria, to run his hotel. Win sells the Hotel New Hampshire, and tells his family a parable of perseverance, about a street performer named King of Mice. Mary and Egg remain behind to close the hotel as the rest of the family arrives in Vienna at the Freud Gasthaus. Win and his children are greeted by the elderly and blind Freud, and a lesbian named Susie, who believes she is ugly and wears a bear costume. The Austrian hotel is occupied by prostitutes and radicals, including a pornographer named Ernst, who looks like Chip Dove. Meanwhile, the airplane carrying Mary and Egg explodes, killing them. As the rest of the family mourns, Franny claims she will take on the role of mother. The children beg Win to return to the U.S., but he has already invested their money in Freud’s hotel. Lilly worries that her father will always be chasing a dream that eludes him, and Win refurbishes the Gasthaus and renames it the Hotel New Hampshire. Meanwhile, Ernst espouses his sexual philosophies to Franny, and John asks Susie to protect his sister. Susie does so by seducing Franny, but Franny soon breaks off the relationship. John questions whether he and Franny will be lovers, but she warns him they can only be brother and sister. Later, Win admits to John that he has failed his family, and they must soon return to the U.S. One of the hotel radicals, Miss Miscarriage, invites John to her room and warns him that he and his family must leave Vienna because the rebels are planning to blow up the Vienna Opera and take the Berrys hostage. John pleads with Miscarriage to leave with them, but she feels she must fulfill her suicide mission. A virgin, Miscarriage asks John to make love to her before she dies. Schwanger, another radical, overhears them and shoots Miscarriage. The radicals enact their terrorist plot and round up the Berrys and Freud. When Win learns that Ernst made love to Franny, he crushes the radical’s skull with a baseball bat. Ernst and Schwanger take Freud outside, and the Berrys overwhelm the remaining radicals. Freud slams the baseball bat into the hood of the car to be used in the Opera House bombing, triggering the explosives. Win is blinded in the blast, but the Austrian government honors the Berrys for foiling the terrorist attack. The family and Susie return to the U.S., and a publisher purchases Lilly’s book, Trying to Grow, for a large sum. Later, Frank negotiates a three-book deal for Lilly, and a starring role for Franny in the movie version of Trying to Grow. Meanwhile, the Berrys reunite with Junior Jones, whose football career is ended by injuries. John continues to pine for Franny. One day in New York City, John and Susie bump into Chip Dove, Franny’s rapist. Chip says he wants to see Franny to apologize, and Susie informs him that she is at the Ritz-Carlton hotel. When Chip visits, the family takes its revenge, ending with Susie, dressed as the bear, sexually assaulting him. Franny sees enough, and calls them off, leaving Chip humiliated. Later, Franny gives in to John’s lust, and they consummate their incestuous relationship, hoping it will cure him. Trying to Grow is a hit as a film, and makes Franny a movie star, but Lily’s second book is a commercial and critical failure. Lilly is crushed and commits suicide by jumping out of a window. Later, the family reacquires the American Hotel New Hampshire, but does not open it to guests. Junior Jones and Franny marry, and after the wedding, Susie laments that she is too ugly to find happiness. That night, she sheds her bear costume and makes love with John. In the morning, John informs Win that Susie will be staying with them. Franny joins her brother and father at the lakefront, and John suggests that Lilly would have said, “Life is a fairy tale.” John imagines a world where they are reunited with the family and friends they have lost: their grandfather, Iowa Bob, their mother, Mary, young Egg, the bear, State O’Main, Sorrow the dog, and Freud.