Kiki is a 13 year-old witch in training, living in a small rural village where her mother is the resident herbalist. By tradition, it is time for Kiki to leave her home to spend a year alone in a new town to establish herself as a full witch. Kiki sets herself on her mother's broom with her closest companion, Jiji, a loquacious black cat. At her departure from home, she has trouble controlling her newly-inherited broom, and ricochets from the trees in her front yard. Wind bells in the trees chime, and one of the neighbors wistfully comments that he will miss the sound of the bells. Soon after leaving, Kiki asks Jiji to turn on the radio. When he does, he flips to a lively pop song and the beginning credits roll. After the credits and song finish, Kiki and Jiji meet another witch on her way back to home from training. After giving some advice about inner skills, this newcomer flies down yelling, "Ciao!" Seconds after she leaves, a terrible thunderstorm comes raining, and the duo land in a train and stay there overnight. Kiki and Jiji wake up to discover they fell asleep in a cow herd's feed-bag. They leave the train and continue their search for a place to live. Kiki soon sees an amazing city.
Kiki settles in the beautiful seaside city of Koriko, and after initially finding it difficult to adjust to the pace of life, starts a delivery service that takes advantage of her ability to fly. Kiki experiences several setbacks such as slow business, misplaced merchandise, rude customers and illness. She also has to deal with her loneliness, worries, and homesickness.
Having caught the eye of Tombo, a local boy about her age, who has an interest in aviation and in Kiki herself, she at first rebuffs, then befriends him. They begin to develop a normal boy-girl relationship. Simultaneously, Jiji courts a local cat called Lily, who he also disliked at first. Jiji has several kittens with Lily, and this can be seen in the end.
Perhaps as a result of neglect, Kiki's powers diminish and ultimately disappear, to her great shame and terror. Kiki learns about overcoming such obstacles with the help of a newfound friend, a young artist named Ursula, who gives some good advice about the kind of inspiration she needs to regain her magic.
Then comes a moment of deadly crisis, when Tombo is accidentally lifted into the air in a dirigible accident. When she is his only hope of rescue, Kiki finds the inspiration to regain her flying ability.
Suddenly famous, she sends home a simple, modest letter to her parents, saying that she is becoming used to her new home, and that things are working out well for her.
The story continues through the end titles, as she flies a high-guard formation with Tombo as he flies his human-powered aircraft in a flight sequence obviously inspired by the Gossamer Albatross. Later, she is on the street of her town and notices a little girl walking past, because the little girl has her hair and clothing styled like Kiki's and is even carrying a small deck broom like the one Kiki flew to save Tombo - an indication of her having become a local celebrity.