Matilda Wormwood (Mara Wilson) is an extremely intelligent girl with a bright personality from an early age, but her spiteful and ignorant parents, Harry (Danny DeVito) and Zinnia (Rhea Perlman) and her older brother, Michael (Brian Levinson), ignore and even mistreat her. When Matilda reaches four, she discovers the local library and walks there every day to read while her family is out, much to the amusement of the librarian, Mrs. Phelps (Jean Speegle Howard), who then provides Matilda with a library card.
By the age of six, Matilda begins to lose patience with her parents. In retaliation for her father belittling her, she mixes his hair tonic with her mother's hair dye. Harry later takes his family to his workshop, where he reveals that the cars he sells are actually faulty and irresponsibly managed. Matilda accuses him openly, he belittles her again and Matilda retaliates against her father again by putting super-glue on his hat which he struggles to get off, forcing Zinnia to cut it off. Harry then belittles Matilda again for reading while her family is watching television. As Harry tries to force her to watch with them, Matilda grows very angry and the television suddenly explodes.
One of Harry's clients, Agatha Trunchbull (Pam Ferris), is the sadistic headmistress of a run-down school, Crunchem Hall. Harry enrolls Matilda in the school, where she befriends several children, but at the same time, learns, especially from Lavender Brown (Kiami Davael) and Hortensia (Kira Spencer Hesser), of Miss Trunchbull's nature and her particularly harsh punishments towards the students, such as a dreaded "Chokey", throwing students out of windows and forcing a boy who unknowingly stole her slice of chocolate cake to eat a whole chocolate cake in front of the entire student body to make him sick (though he manages to finish the cake without getting sick). Fortunately, Matilda's teacher, Miss Jennifer Honey (Embeth Davidtz), is a kind and lovely woman who adores her pupils and takes an immediate liking to Matilda for her intellect. Miss Honey speaks with Miss Trunchbull and requests that Matilda be moved up to a higher class. Miss Honey pays Matilda's parents a visit and requests that they pay more attention to their daughter, but they refuse to listen, effectively leaving Miss Honey as the only person who actually pays attention to Matilda. Meanwhile, Matilda discovers that she and her family are under FBI surveillance, because of her father's shady dealings, and purchasing of stolen goods and car parts, but her parents refuse to believe her, the FBI agents having already fooled them into thinking they are speedboat salesmen.
Sometime later, Miss Trunchbull goes to Matilda's class for a weekly "check-up" and starts to belittle the students. As a prank, Lavender places a newt in Miss Trunchbull's water jug to frighten her. Miss Trunchbull, however, accuses Matilda, and Matilda's rage at the injustice leads to her telekinetically tipping the glass over and splashing the water and the newt onto Miss Trunchbull, frightening her. Feeling sympathy for Matilda, Miss Honey invites her to her house for tea. On the way, they pass Miss Trunchbull's house, and Miss Honey reveals her secret to Matilda: when she was two years old, her mother died, so her father, a doctor, invited his wife’s stepsister, Miss Trunchbull, to live with them and look after Miss Honey while her father was at work. However, Miss Trunchbull mistreated and abused her niece at every opportunity. When Miss Honey was five, her father died of an apparent suicide and in his will, he left all of his assets to Miss Trunchbull, leaving his daughter with nothing. Miss Honey eventually moved out of her aunt’s house into a nearby cottage she rented from a local farmer. Matilda and Miss Honey briefly sneak into Miss Trunchbull's house when she is out, but her unexpected return leads to a cat-and-mouse chase in which Matilda and Miss Honey barely flee unseen.
When Matilda's telekinetic powers manifest again during when Zinnia and Harry argue, to which Matilda slams the door in Harry's face, Matilda trains herself to use her ability at her own will, and her first act involves sabotaging the FBI agents' vehicle during their attempt to search the Wormwood's garage without a warrant. That night, Matilda returns to Miss Trunchbull's house, and from outside, wreaks havoc in an attempt to scare Miss Trunchbull away. Miss Trunchbull almost flees in terror, but she finds Matilda's ribbon in the process and realizes she was actually there. The next day, Miss Trunchbull visits Matilda's class again to get Matilda to admit her guilt, but as she begins belittling the children again, Matilda uses her powers to write a message on the blackboard, posing as the ghost of Miss Honey's father accusing Miss Trunchbull of murdering him and ordering her to leave town. Miss Trunchbull is driven insane by the terror and attacks the students, but Matilda keeps them out of harm's way with her powers and the students then force Miss Trunchbull out of the school by pelting her with food and garbage until she leaves. Miss Honey's father's true will is discovered by the police, which named Miss Honey as the sole beneficiary of her father's assets, and Miss Honey moves back into her home, with Matilda visiting frequently.
Sometime later, however, the FBI finally uncovers enough evidence to prosecute Harry, and they prepare to flee to Guam. They stop by Miss Honey's house to take Matilda with them, but she refuses to accompany them, claiming she wants to stay with Miss Honey, who admits that she has come to see Matilda as the daughter she never had. In that moment, Harry and Zinnia then state that Matilda was the only daughter they had ever had and never understood, but they decide to let Miss Honey adopt her by signing the adoption papers, this time on good terms with her. Harry, Zinnia and Michael escape, while Matilda lives a happy life with Miss Honey.
- Mara Wilson as Matilda Wormwood
- Alissa and Amanda Graham, Trevor and James Gallagher as Matilda - newborn
- Kayla and Kelsey Fredericks as Matilda - 9 months
- Amanda and Caitlin Fein as Matilda - toddler
- Sara Magdalin as Matilda - 4 years
- Danny DeVito as Harry Wormwood/Narrator
- Rhea Perlman as Zinnia Wormwood
- Embeth Davidtz as Miss Jennifer Honey
- Brian Levinson as Michael Wormwood
- Nicholas Cox as Michael - 6 Years
- Pam Ferris as Agatha Trunchbull
- Paul Reubens as FBI Agent Bob
- Tracey Walter as FBI Agent Bill
- Kiami Davael as Lavender
- Jacqueline Steiger as Amanda Thripp
- Kira Spencer Hesser as Hortensia
- Jimmy Karz as Bruce Bogtrotter
- Jean Speegle Howard as Mrs. Phelps
- Marion Dugan as Cookie
- Emily Eby as Maggie
- Jon Lovitz as Mickey on The Million Dollar Sticky