The Greek doctor Dr. Iannis attempts to write an impartial history of his island, Cephalonia. However, he finds he cannot do so without getting angry about the numerous Greek conquests, so he amends his title to read "A Personal History of Cephalonia." In the village, his daughter Pelagia falls in love with a young fisherman named Mandras. They get engaged in August on the feast day of St. Gerasimos, but Pelagia is unhappy about it. Dr. Iannis refuses to provide a dowry, suggests Mandras is too uneducated to appreciate Pelagia, and counsels that they should wait to get married until after the war. Dr. Iannis spends most of his time at the kapheneia with his friends Stamatis and Kokolios, who are royalist and communist respectively. Though they used to fight about politics, as the war moves towards Greece, the three band together for the sake of their country. Dr. Iannis also adopts a pine marten that the child Lemoni names Psipsina.
It's 1940 and Mussolini is preparing to invade Greece. He fabricates border incidents and in August, he torpedoes a Greek ship. In the fall he sends his delegate Grazzi to deliver an ultimatum to Metaxas, the prime minister of Greece. Metaxas refuses to allow the Italians invade, but they invade anyway. Mandras leaves to join the war effort and Dr. Iannis gives Pelagia a pistol to protect herself.
Carlo, a gay soldier in the Italian army, begins to tell his story. He joins the army so that he can find love, and he does: Francisco, a married man, becomes his best friend and the unwitting object of Carlo's affections. The two are communists and are uneasy about rebuilding the Roman Empire, but they follow orders to blow up a "Greek" watchtower. They discover that the mission was actually an attempt to frame Greece. That winter, their division invades Greece. For months the Italians march in the cold and the wet as Greek forces pick them off at their leisure. Francisco goes mad from exposure and hunger and commits suicide. He dies in Carlo's arms, and Carlo shoots himself in the thigh to get out of Greece. He later visits Francisco's mother and tells her that Francisco died peacefully and for a good cause.
Pelagia begins writing letters to Mandras, though he never writes back. She starts working on a bedcover and a waistcoat, though she struggles with the crochet as her mother died before teaching her any of those female skills. Dr. Iannis notices this and does what he can to take Pelagia's mind off her sadness. It works and when a skeletal, smelly, and nearly unrecognizable Mandras shows up in her kitchen, she doesn't recognize him. She fetches Mandras’s mother Drosoula and the two women attend to Mandras's many ailments, which makes Pelagia realize she wants to be a doctor. Mandras understands that Pelagia is disgusted by him; he wants to return to the front so that he can do something to make her proud. To Pelagia he seems mad, though he miraculously returns to normal on the day the Italians invade. The Italians make fun of Hitler as they march through the streets and, shockingly for Kokolios, some of them seem to be communist. Carlo arrives in Cephalonia a few weeks after the other Italians. Though he's still grieving Francisco, he soon falls in love with Captain Corelli. Corelli runs an opera group called La Scala that sings on the toilet and he "drafts" Carlo as soon as he hears him sing.
Soon, the Italians decide to house officers with local Greeks. Dr. Iannis strikes a deal with a quartermaster to house an officer in exchange for medical supplies, so Corelli arrives that evening. Dr. Iannis and Pelagia do everything in their power to make Corelli feel horrible about occupying Greece, including telling him that Psipsina is a "Greek cat." When Psipsina bites Corelli, he feels very foolish. The following morning, Carlo meets the Greek strongman Velisarios and Corelli strikes up a friendship with Lemoni. Mandras calls later to tell Pelagia he's joining the partisans. He insults her and the waistcoat she made him, but promises he loves her. Corelli notices the coat later and offers to buy it, insisting it's magnificent.
Corelli begins to play mandolin for Pelagia and the two talk about their dreams for life after the war. Corelli wants to be a musician and for the first time, Pelagia voices her desire to be a doctor. Though Pelagia and Dr. Iannis continue to torment Corelli, Pelagia finds herself falling for him. She stares at him, touches him without thinking, and becomes gradually less angry with him. Dr. Iannis notices their budding romance and wonders what to do.
Mandras joins a partisan group called ELAS, which is communist and seeks to take control of Greece after the war. He has to whip a man in order to gain entry and he's entranced by the communist theory that the leader, Hector, introduces him to. Mandras learns to hate the British and the bourgeoisie, including Dr. Iannis. A fellow partisan who doesn't believe Hector tells Mandras that the main point Hector makes is that if they don't obey him, they'll die. Meanwhile, Corelli becomes friends with a young German soldier, Günter Weber. Weber only hates Jews because he's never met one and Corelli quickly drafts him into La Scala.
A pamphlet appears on Cephalonia one day that makes fun of Mussolini and all the ways in which he's hypocritical and absurd. Corelli isn't charmed, though Carlo and Dr. Iannis are. Pelagia suggests that given the syntax, the pamphlet could've been written by conspiring Greeks and Italians, but when she sees her father and Carlo's reaction to this, she thinks they're stupid. A few days later, Corelli wakes up with a hangover, argues with Pelagia about his role in the war, and begins to compose "Pelagia's March."
Dr. Iannis arranges for Lemoni to take his household to gather snails, as there's little else to eat. Corelli and Pelagia become separated from Dr. Iannis and Lemoni, and they admit that they love each other. Corelli struggles with the fact that the war that brought them together is ruining Greece, which makes Pelagia angry. She tries to prepare the snails but is interrupted when Lemoni visits and Corelli realizes she found a mine. Though the mine is old, Corelli and Carlo decide to blow it up for safety. The entire village and the Italian troops watch. It kills an engineer and covers everyone in sand. Corelli and Pelagia spend as much time as they can kissing, talking about the future, and riding a motorcycle around the island.
Early one morning, Alekos the goatherd notices an angel falling from the sky. Alekos nurses the injured angel for two days before leading it to Dr. Iannis's house. Dr. Iannis discovers that the angel is actually a British spy, Bunnios, who speaks ancient Greek.
Dr. Iannis counsels Pelagia and Corelli in turn. He tells Pelagia to wait to marry Corelli until after the war, as that's the only way she'll know if their love is genuine. He tells Corelli that Pelagia has a dark and mysterious other side, as all Greeks do, and cautions him against making plans.
One night when La Scala gathers at Dr. Iannis's house, Weber makes several jokes in poor taste and defends his Nazi beliefs. He also promises to leave Pelagia his gramophone after the war. In the weeks after, things begin to go downhill. The Allies invade Italy, and the Italian general in Greece, General Gandin, refuses to issue orders that could save his men. On September 8, Carlo hears that Italy surrendered to the Allies. The Italians are asked to surrender to the Germans, and Weber hopes to be able to teach his friends a lesson. Gandin tries to act honorably, but the German General Barge betrays him and orders his troops to attack the Italians. Corelli leads his men in the fight and Stamatis, Kokolios, and Velisarios go to help. Finally, after three days, the Italians are forced to surrender.
Though Weber tries to refuse, he eventually agrees to lead the firing squad and execute his Italian friends. Corelli forgives Weber and when the shooting starts, Carlo steps in front of Corelli. Weber allows Corelli to live and that night, Velisarios discovers Corelli and Carlo. He carries Corelli to Dr. Iannis's house, where he and Pelagia perform surgery to remove the bullets. In the morning, they bury Carlo under their olive tree. The Germans burn the rest of the bodies as Pelagia and Dr. Iannis care for Corelli. When he's well enough Corelli moves to an abandoned shack and then Bunnios smuggles him off the island. Before Corelli goes, Dr. Iannis gives him permission to marry Pelagia and Pelagia gives him the waistcoat.
When the Germans leave Cephalonia, Weber follows through and leaves Pelagia the gramophone. The Greek Civil War starts and ELAS wreaks havoc on Greece. Dr. Iannis, Kokolios, and Stamatis are taken to concentration camps, and Drosoula moves in with Pelagia. Eventually, Mandras returns, fat and mean. He intimidates Pelagia, admits he read her letters and knows she doesn't love him, and tries to rape her. Pelagia shoots him and Drosoula disowns him. Mandras drowns himself in the ocean.
Drosoula and Pelagia adopt a baby girl they name Antonia. Dr. Iannis returns after two years, though he doesn't speak again. Pelagia discovers Carlo's papers in the trapdoor and reads them. Soon, the village begins to spread rumors that Pelagia is a witch for practicing medicine. Pelagia comes to believe in ghosts when she starts to see Corelli's ghost every year at the anniversary of the massacre, and she pretends that she's Italian. In 1953, the great earthquake strikes Cephalonia, destroying everything. Dr. Iannis dies saving Pelagia and Drosoula, and Pelagia struggles with the grief for years afterwards. She only recovers when she picks up Dr. Iannis's History and finishes it for him. As she does, she begins to talk to Antonia about politics. Because of this, she's not surprised when Antonia marries an older radical lawyer, Alexi, and claims to be communist.
Drosoula opens a taverna to serve the increasing number of tourists. Antonia eventually gives birth to a boy that Pelagia names Iannis. Iannis spends most of his time at the taverna and as he grows, he desperately wants to impress girls. He asks the musician Spiridon to teach him the bouzouki, but Spiridon suggests Iannis pick up a mandolin first. Pelagia gives them permission to dig up Corelli's mandolin and as they do, Velisarios explains that he leaves a rose on Carlo's grave every year. Iannis is very talented and when he's fourteen, Corelli catches him playing up at the old house. He reunites with Pelagia and explains that he did come back for her, but he thought she was married because he saw her with a baby. She's extremely angry, but warms to him when he gives her a cassette of "Pelagia's March." He convinces her to ride a motorcycle with him like they used to.