Just before her 16th birthday, Mia learns her paternal grandmother, Clarisse, is visiting from Genovia, a small European kingdom. When Mia goes to meet her at a large house (later revealed to be the Genovian consulate), Clarisse reveals she is actually Queen Clarisse Renaldi, and that Mia’s late father was Crown Prince of Genovia. Mia is stunned to learn she is a princess and next and sole heir to the Genovian throne.
In shock, Mia runs home and angrily confronts her mother, who explains she had planned to tell Mia on her 18th birthday, but that her father’s death has forced the issue. Queen Clarisse visits and explains that if Mia refuses the throne, Genovia will be without a ruler. Helen persuades a reluctant Mia to attend "princess lessons" with the Queen, telling her she does not have to make her decision until the upcoming Genovian Independence Day ball.
Mia is given a glamorous makeover, the use of a limousine and a bodyguard (the Queen’s head of security, Joe). This and Mia's frequent absences for the lessons make Lilly suspicious, and she accuses Mia of trying to be like the popular girls. Mia breaks down and tells Lilly everything, swearing her to secrecy. However, the San Francisco Chronicle learns that Mia is the Genovian Crown Princess after hairdresser Paolo breaks his confidentiality agreement, causing a press frenzy, and a sudden surge in popularity at school for Mia.
At a State Dinner, Mia embarrasses herself with her clumsiness, delighting her rivals for the crown. However, all is not lost as the situation amuses a stuffy diplomat, and the Queen tells Mia the next day she found it fun. Deciding it is time the two bonded as grandmother and granddaughter, the Queen allows Mia to take her out in Mia's late 60s Ford Mustang convertible for the day to an amusement arcade. The day almost ends badly when Mia rams her car into a cable car, but Queen Clarisse saves the day by appointing the attending police officer and the tram driver to the "Genovian Order of the Rose" (a fictitious chivalric order), flattering them into dropping any charges (since no one got hurt and the cable car was fully insured).
Mia is delighted when Josh Bryant invites her to a beach party, but her acceptance hurts Lilly and Michael, who she had plans with. Things go wrong when the press arrive, tipped off by Lana. Josh uses Mia to get his fifteen minutes of fame by publicly kissing her, while Lana tricks her into undressing in a tent, removing it as she is semi-nude just as the paparazzi arrive. The photos appear on tabloid covers the following day, leaving Queen Clarisse furious. A humiliated Mia tells her she is renouncing the throne feeling she is nowhere near ready to be a true princess. Joe later reminds Queen Clarisse that although Mia is a princess, she is still a teenager and her granddaughter.
Back at school, Mia attempts to rescue her friendships with Lilly and Michael by inviting them to the Genovian Independence Day Ball, gets back at Josh for using her by hitting a baseball into his gut during gym class, and finally stands up to Lana when she is cruel to Lilly’s friend Jeremiah, publicly humiliating her by smearing ice cream on her cheerleader outfit. Lilly accepts their invitation, but Mia, terrified at the thought of publicly announcing her decision, plans to run away. However, when she finds a letter from her late father, his touching words make her change her mind, and she makes her way to the ball. Mia’s car breaks down in the rain, but she is rescued by Joe, who had suspected she planned to run away.
When they arrive, a drenched and bedraggled Mia voices her acceptance of the title of Genovian princess. Mia gets dressed up and enters with Clarisse for the dance. At the last moment Michael shows up after Mia's second attempt to apologize. The two dance and Mia shares her first kiss with Michael, while Clarisse and Joe are seen holding hands. In the final scene Mia is seen on a private plane, with Fat Louie next to her wearing his own tiara, writing in her diary, explaining she is moving with her mother to Genovia, with the beautiful royal palace and landscape coming into view below
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