Where the Red Fern Grows is the story of Billy Coleman, a man reminiscing about his childhood in the Ozarks and the Redbone Coonhounds he raised and trained. After working diligently to purchase the dogs, Little Ann and Old Dan, as puppies, the young Billy raises them as champion hunters. They accompany him as he grows into a man, helping him through many turbulent periods. Eventually Old Dan is killed fighting a Mountain Lion and Little Ann dies of grief shortly thereafter. His innocence lost, Billy confronts adulthood.
When leaving work in Idaho's Snake River Valley, Billy Colman sees a pack of dogs attacking a stray coonhound. He chases the pack away and takes the stray home with him so he can nurse it back to health. Once it has recovered, Billy sets it free knowing that it will return home.
The experience reminds Billy of his childhood growing up in the Ozark Mountains of Oklahoma. He wants a dog, and his parents offer to get him a puppy from a neighbor's litter. He is very specific, however, and tells them he wants two coonhounds, but his parents tell him that they don't have enough money. One day, he comes across a magazine advertisement for a kennel in Kentucky which breeds Redbone Coonhounds and sells them for $25 each. Determined to get dogs, he goes to work performing odd jobs such as selling vegetables to local fishermen and manages to save the $50 he needs with the help of his grandfather. However, since it takes two years to do so, his grandfather writes ahead to see if the kennel will honor the ad. They do so, and the price has dropped so the two puppies will only cost $40.
Since the mail buggy does not deliver any living being, Billy's dogs are to be delivered to the freight depot in Tahlequah. His family is poor and does not have transportation, so he finds his own way to get to the depot and chooses to go straight through the hills. He picks up and leaves with his puppies, which are a male and a female. He also decides to buy something nice for each member of his family with his extra $10 before heading back home; he buys a pair of overalls for his father, some dress cloth for his mother, and a bag of candy for his sisters.
On the way back home, he spends the night in Robber's Cave on Sparrow Hawk Mountain. There he builds a fire and plays with the puppies. While trying to sleep, he hears a noise that he realizes is the cry of a mountain lion. In the morning, he continues on. He comes to a sycamore tree and sees the names Dan and Ann carved inside a heart in the bark and decides to name the puppies Old Dan and Little Ann.
To train Old Dan and Little Ann, Billy traps a raccoon with the help of his grandfather and uses its pelt to teach them to hunt. During their training, their personalities become apparent: Old Dan is brave and strong, while Little Ann is very intelligent. Both are very loyal to each other and to Billy.
On the first night of hunting season, Billy takes Old Dan and Little Ann out for their first hunt. He promises them that if they tree a raccoon, he will do the rest. They tree one in a large sycamore, which Billy had previously nicknamed "The Big Tree". As he tries to call them off, they look at him sadly and he cuts the tree down, which takes him two days and costs him blistered hands. In the end, when he's about to give up his effort, Billy offers a short prayer for strength to continue. A strong wind starts to blow and the tree falls. Old Dan and Little Ann take the raccoon down.
Billy, Old Dan, and Little Ann go hunting almost every night. As months go by, he brings more fur to his grandfather's store than any other hunter, and the stories of his dogs spread throughout the Ozarks. One day, he and his grandfather make a bet with Rubin and Rainie Pritchard, that his dogs can catch the legendary "ghost coon". Rubin and Rainie set out with him to see if Old Dan and Little Ann can do so. It leads them on a long, complicated chase, and Rubin and Rainie want to give up. But Billy is determined. Finally, when they have it treed, Billy refuses to kill it. Rubin then orders his dog, Old Blue, to attack Old Dan, who is smaller; and Rubin starts to beat Billy to stop him from interfering. Little Ann then helps Old Dan, and together they are killing Old Blue; Rubin runs to attack them with an axe, but he trips on it and kills himself. Billy is very distraught afterward.
A few weeks later, Billy's grandfather enters him into a championship raccoon hunt, putting him against experienced hunters and the finest dogs in all the country. Before it starts, he enters Little Ann into a contest for the best-looking dog, where she wins and is given the silver cup. On the fourth night of the hunt, Old Dan and Little Ann tree three raccoons, making it to the final round. The sixth night, they tree one before a blizzard hits. Billy, his father, grandfather, and the judge lose sight of the dogs. When they finally find them, Billy's grandfather sprains his ankle. They build a fire, and when Billy's father chops down a tree, three raccoons jump out. Old Dan and Little Ann take two of them down, and chase the third one to another tree. In the morning, the hunters find them covered with ice circling the bottom of a tree. The last raccoon wins them the championship and the gold cup. The hunters also present them with $300 of jackpot money.
Billy's mother and sisters are overjoyed with the prizes. He keeps up his hunting. One night, however, Old Dan and Little Ann tree a mountain lion, and it attacks. Billy is horrified, and with his axe he enters the fight, hoping to save his dogs, but they end up having to save him. Eventually, they defeat the mountain lion, but Old Dan is badly wounded, and Billy soon finds his intestines in a bush. He dies late that night. Billy is heartbroken, and Little Ann loses the will to live, stops eating, and dies of grief a few days later on Old Dan's grave. Billy's father tries to tell him that it is all for the best, because with the money they received from winning the championship hunt, they can move to town. He goes to visit Old Dan and Little Ann's graves and finds a giant red fern between them. According to Native American legend, only an angel can plant one. He and his family look at it in awe, and he feels ready to move on knowing that his dogs are always going to be remembered.
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