Harriet M. Welsch is an outgoing 11-year-old girl aspiring to be a writer and a spy. Living a privileged life on the Upper East Side, as practice for her future career she observes others carefully and writes everything she thinks in a notebook.

One day during a game of tag, Harriet loses her notebook and is mortified when her friends find it and Marion proceeds to read all of Harriet's secret thoughts to everyone. The children find some of what she wrote hurtful, and the class forms the Spy Catcher Club. The club meets regularly to think up ways to make Harriet's life miserable, including stealing her lunch and spilling paint all over her during art class.

Out of utter frustration and envy, Harriet drops a note in the Hennesseys' mailbox for Rachel's mother. It states, “All those kids hate Rachel. They just want your cake. Furthermore they will clutter up the backyard and also they constitute a nuisance.” The Hennesseys find it and Rachel later announces to the Spy Catcher Club that a crank note was dropped in her mailbox. She summarizes what the note said, and to Harriet's amusement, Pinky Whitehead states, “Well, it's very good cake.”

Hurt and lonely, Harriet resorts to childish tantrums and resolves to get back at her former friends by thinking up a special punishment for each one. She gets into trouble when she carries out some of her plans, including cutting off a chunk of Laura's hair. When that fails, Harriet tries to resume her friendship with Sport and Janie as if nothing ever happened, but they both reject her. Spending all her time in class writing in her notebook causes her grades to suffer, and Harriet's parents confiscate her notebook and take her to a psychologist.

Harriet's parents speak with her teacher and the headmistress, and Harriet is appointed editor of the class newspaper. The newspaper becomes an instant success and after some time as the editor, Harriet makes amends to her former friends, offering a printed retraction and saying that the statements in her notebook were unfair statements. Sport and Janie forgive her, and all is well again.