Mirabelle Buttersfield, a transplanted Vermonter, is an aspiring artist and saleswoman at the evening gloves counter at Saks Fifth Avenue in Beverly Hills. Her quiet, orderly existence - filled with both the mundane (futon furniture and an aging pickup truck) and the serious (a large student loan and a supply of antidepressants) - is disrupted by the sudden appearance of two disparate men. Jeremy is an immature, awkward, socially inept, penniless twenty-something graphic designer for an amplifier manufacturer and aspiring typographer who enters Mirabelle's life first (in a laundromat). Mirabelle, aching for any kind of meaningful contact with someone else gives him a chance, but it quickly fizzles after a half-hearted date (that she pays for) followed by a woefully underwhelming sexual encounter. Ray Porter is a considerably older, suave, well-dressed, wealthy, divorced logician. Ray charms Mirabelle over the course of a few dates, one of which ends at his house. Mirabelle offers herself to him and after partaking of her body, the next morning Ray tells her that he does not intend for their relationship to be serious due to his constant traveling between L.A. and Seattle. Both have different understandings of this talk: Ray tells his psychiatrist that Mirabelle knows that he is going to see other people and Mirabelle tells her acquaintances that Ray wanted to see her more.

Mirabelle and Ray embark on a lengthy affair, during which time Jeremy is working as a roadie for the band Hot Tears. He had attempted to have one last liaison with Mirabelle before leaving, but she spurned him due to her relationship with Ray. While on tour, the band's lead singer introduces Jeremy to the world of self improvement and how to better relate to the opposite sex. Mirabelle becomes increasingly devoted to Ray, who showers her with expensive gifts (such as paying off her student loans) instead of actual affection. When Mirabelle's depression hits her hard (she has ceased to take her antidepressants since Ray makes her happy), he takes her to the doctor and cares for her, further deepening her reliance on him. Ray is spurred to invite Mirabelle on a trip to New York for which Ray has her fitted in the dress shop at Armani.

During a business trip, Ray has dinner with an old friend. During dinner she propositions him and he accepts. Ray immediately confesses on return to L.A. and a devastated Mirabelle cuts things off with him, cancels her trip to New York and decides to visit Vermont. While she is basking in the warmth and familiarity of home, Ray calls. He apologizes for hurting her and asks her to come to New York. She accepts and attends his function. She is the youngest person at the party and is for the most part, alone and out of place. When they return to the hotel room, Ray wants to be intimate, but Mirabelle isn't ready.

A while later, Mirabelle meets Jeremy by accident on the way to an art gallery showing and her coworker Lisa (who has investigated the bearer of the new clothes Mirabelle has been wearing to work) mistakes him for Ray when they walk in together. Jeremy is a new man and all he has learned during his time away is evident to anyone but Mirabelle. After the showing, Mirabelle goes home with Ray and Lisa goes home with Jeremy thinking he's Ray. The next morning Ray devastates Mirabelle by announcing that he plans on looking for a bigger house in case he "meets someone and decides to have kids". Jeremy calls Lisa thinking they have made a connection, but quickly finds out she has no interest in anything but Ray Porter (and his money).

Mirabelle decides to stop postponing the inevitable and breaks things off with Ray for good. After taking time to grieve the loss of the relationship, she quits her job at Saks for one as a receptionist in an art gallery. Jeremy then begins to pursue her again, this time the correct way. Over time they fall in love with one another and eventually make love. Mirabelle receives an invitation to show her work and at the opening, Ray shows up with his new girlfriend. Their interaction is noticeably strained as they search for shallow things to chat about. At the end of their conversation, Ray apologizes for how deeply he hurt her and admits (for the first time) that he did love her. A shocked and touched Mirabelle smiles through her oncoming tears and turns to walk away. As Ray watches Mirabelle run into Jeremy's loving arms, he remarks on how he feels a loss although he purposefully kept Mirabelle at arm's length so that when they broke up it wouldn't hurt him, which it invariably does.

In Steve Martin's original novella, Mirabelle was employed by Neiman Marcus. According to Evolution of a Novella: The Making of Shopgirl, a bonus feature on the DVD release, Saks Fifth Avenue actively pursued participation in the film by presenting a proposal to the producers and director and promising full cooperation with filming schedules. Strangely enough, the gloves in the counter are not actually from Saks, but rather a small boutique in Toronto, where some of the movie was filmed.

According to Martin's book Born Standing Up, there are many parallels to Martin's own life. Early in his career, he lost a girlfriend to an older, suave gentleman resembling Ray Porter, real-life Mason Williams. Williams had a house that matches the description of Ray Porter's, it overlooked Los Angeles from roughly the same vantage point and the descriptions of the two houses are the same. Williams was an actuary at one point, whereas Porter was a logician. Martin and Williams both vied for the attention of a girlfriend, Nina. The relationship ended when Martin, much like the Schwartzman character, goes on a cross country tour as a roadie. These parallels make the novella somewhat autobiographical.

Martin had Tom Hanks in mind for the role of Ray Porter at the time he was writing the screenplay, but director Anand Tucker felt that Martin was so close to the material and had such a strong understanding of the character that Martin should play the part himself. After auditioning numerous actresses, he knew Claire Danes was perfect for the role of Mirabelle as soon as she began reading lines with Martin. He found Jeremy much more difficult to cast, and remembered Jason Schwartzman (but not his name) from his performance in Rushmore only two weeks before filming was scheduled to begin.

The apartment building used for Mirabelle's residence is located at 1630 Griffith Park Boulevard in Los Angeles.

The songs "Lily & Parrots," "Carry Me Ohio," and "Make Like Paper" were written and performed by Mark Kozelek. Tucker remembered him from his appearance in Almost Famous and cast him as the lead singer of Hot Tears. Both "Carry Me Ohio" and "Lily and Parrots" were tracks on Ghosts of the Great Highway, the first CD released by Kozelek's real-life band Sun Kil Moon. "Make Like Paper" was a track from "Songs for a Blue Guitar", an album by Kozelek's earlier band Red House Painters.