In Victorian England, widowed undertaker Cedric Brown has seven unruly children. He is clumsy and loves his children but spends little time with them and cannot handle them. The children have had a series of nannies, which they systematically drive out by their bad behaviour. They also terrorize the cook, Mrs. Blatherwick.
One day, Cedric discovers throughout the home references for a “Nanny McPhee”. That stormy night, the children cause havoc in the kitchen. Cedric sees a shadow behind the door and opens it to reveal a frighteningly hideous woman, who states that she is Nanny McPhee and is a “government nanny”. With discipline and a little magic, she transforms the family’s lives. In the process, she changes from ugly to beautiful, her warts and unibrow disappearing. The children, led by the eldest son Simon, try to play their tricks on her, but gradually start to respect her and ask her for advice. They change to responsible people helping their clumsy father in solving the family problems, making Nanny McPhee less and less needed.
The family is financially supported by Cedric’s late wife’s domineering and nearsighted aunt Lady Adelaide Stitch, who demands custody over one of the children. She first wants Christianna (Chrissie), one of the daughters, but Evangeline, Cedric’s uneducated scullery maid, volunteers and Adelaide agrees, assuming she is one of the daughters. She also threatens to reduce the family to poverty unless Cedric remarries within the month; the family would lose the house, and they would not be able to stay together. Desperate, Cedric turns to a vile and frequent widow, Mrs. Selma Quickly. The children assume from books that stepmothers are terrible; therefore they sabotage a visit of Mrs. Quickly, who leaves, angry at Cedric. After the financial rationale for the marriage is explained to the children, they agree to the marriage, and appease Mrs. Quickly by confessing they were to blame for the disturbance of her visit, luring her back to their father with tales of their Great Aunt Adelaide’s wealth.