Kate and John Coleman (Vera Farmiga and Peter Sarsgaard) are experiencing strains in their marriage after their third child is stillborn. The loss is particularly hard on Kate, who is also recovering from alcoholism. The couple decides to adopt a 9-year-old Russian girl named Esther (Isabelle Fuhrman) from a local orphanage. While Kate and John's deaf daughter Max (Aryana Engineer) embraces Esther immediately, their son Daniel (Jimmy Bennett) is less welcoming. Kate suspects that there might be problems in Esther's background when Esther's knowledge of sex extends beyond her age. Her suspicions deepen when Esther injures another girl who had bullied her at school.
Kate is further alarmed when Sister Abigail (C. C. H. Pounder), the head of the orphanage, warns her that bad things happen when Esther is around. Esther overhears this and plots to use Max to distract Sister Abigail and then kill her. Esther pushes Max into the path of Sister Abigail's car, forcing her to swerve off the road. Esther then kills Sister Abigail with a hammer, and forces Max to help her hide the weapon in their tree house. Kate is convinced that something is very wrong with Esther, but John does not believe her. Kate finds Esther's hidden Bible and discovers that it came from the Saarne Institute in Estonia, a mental hospital. She emails a picture of Esther to them and asks for more information.
When Daniel learns about Sister Abigail's death, he tells Max of his plan to retrieve the hammer to prove Esther's guilt. Esther overhears this and confronts Daniel at the tree house, then sets it ablaze to kill him and destroy the evidence. Daniel falls from the tree trying to escape, and is knocked unconscious. Esther attempts to finish him off, but Max stops her. While Daniel is hospitalized, Esther slips into his room and smothers him with a pillow, stopping his heart; doctors quickly revive him. Kate realizes what happened and attacks Esther but is restrained and sedated.
That night, a provocatively-dressed Esther tries to seduce a drunken John, who finally realizes Kate was right. He tells Esther that her future with the Coleman's is at stake, upsetting her. Kate receives a call from Dr. VÃ¤rava (Karel Roden), the director of the Saarne Institute, who reveals that Esther is actually a 33-year-old woman named Leena Klammer, who has hypopituitarism, a hormone disorder that stunted her physical growth, and that she has spent most of her life posing as a little girl and had people adopt her, with the goal of seducing the father and having a sexual relationship with him. The doctor reports that Leena has murdered at least seven people. The previous family she was adopted by was killed by her because the father had rejected her sexual advances. Kate tries to get back home to stop Esther and prevent her family from suffering the same fate. Leena flies into a rage after being spurned by John, and ransacks her room, removing her "little girl" makeup, revealing the scars from a straitjacket and weathered skin.
Leena stabs and kills John. Max witnesses this and hides. Kate rushes home and finds John dead. Leena gets a gun from John's safe and shoots Kate in the arm. Kate manages to take the gun and flee with Max. Leena finds Kate and Max near a frozen pond. She lunges at Kate, hurling them both into the ice. Kate climbs partially out of the pond; Leena, reverting to her "Esther" persona, begs Kate not to let her die while hiding a knife behind her back. Kate kills Leena by kicking her in the face, breaking her neck, and a dead Leena sinks back into the pond. Max and Kate are met by the police moments after.
What does Esther do to Daniel at the hospital?
Smothers him with a pillow