Jesse Aarons, a fifth-grader, is trying to become the fastest boy in the third through fifth grades. He wants to attain this goal, in part, to make his father proud of him. His father doesn't take much notice of Jesse, instead he saves his affections for Jesse's sisters. Jesse is the only boy in the family of five children, which makes him feel alone.

His only other talent, besides running, is drawing. Jesse is a talented artist, but his father doesn't feel drawing is an appropriate activity for a boy, so Jesse draws in secret. He shows his drawings only to his sister, May Belle, and his music teacher, Miss Edmunds. Jesse is in love with his music teacher, because she is beautiful and encourages him to keep drawing.

One day a new girl, Leslie Burke, moves into the house down the road from Jesse's home. She doesn't wear dresses, so the other girls pick on her. She wants to be friends with Jesse. She tries to talk to him during the recess races and he tries to ignore her. After a disagreement about the races, a boy suggests Leslie should run, which Jesse agrees to. He, along with the other boys, is stunned when she not only wins her heat, but wins the final race as well.

Jesse ignores her when she tries to speak to him after the races. He doesn't ignore her for long, as they start to bond during music class. He finds out Leslie's parents have moved to Lark Creek to simplify their lives. They did not anticipate Leslie being taunted and teased at school. Her only friend at school is Jesse.

One day on the way home from school, seventh-grader Janice Avery bullies Leslie, but Jesse intervenes and stops Janice. Leslie is grateful to him and their friendship starts to become even stronger.

Leslie suggests they go and play in the woods behind her house. There they find a rope tied to a tree overlooking a creek. Crossing over the creek, they find the perfect place to be their secret sanctuary; Leslie calls it Terabithia. It is their own hidden, magical country where they are the king and queen. There they both feel safe, expressing their secrets to one another, with Leslie telling Jesse stories he has never heard. She opens a new world up to him.

After Janice steals May Belle's Twinkies, she demands Jesse beat Janice up, but instead of that, Jesse and Leslie exact revenge in another way. They embarrass Janice by making her think the best-looking boy in the seventh grade is in love with her. After telling the other students about a note he wrote her, Janice is left waiting for the boy to rendezvous with her after school. The next day she is livid that he didn't show up and she had to walk home from school alone. Jesse and Leslie tell May Belle they planted the note, to get even with Janice for stealing from her.

On Christmas Eve Jesse gives Leslie a puppy; she names him Prince Terrien, and she gives Jesse some art supplies. This is Jesse's best Christmas, because of his new-found friend.

After Christmas, Leslie starts to help her dad renovate their house, which cuts into the amount of time she can spend with Jesse. He expresses his disappointment at not being able to spend as much time with her as he likes. After telling Leslie he wants to spend more time with her, she suggests he can help them with the renovations.

One night, after Leslie helped Janice Avery overcome being teased at school, May Belle tells Jesse she knows about Terabithia. He makes her promise to keep the secret.

That Easter Leslie asks if she can accompany Jesse and his family to church. She has never been to church before and wants to have the experience. She enjoys it, but still doesn't believe in God, which leads May Belle to wonder what will happen to Leslie if she dies. May Belle thinks Leslie will go to hell.

The week after Easter, it rains hard and the creek swells, which is frightening to Jesse. He doesn't want to cross it using the rope, but does so because Leslie does. He is afraid of what will happen the next day, Thursday, because he knows Leslie will insist on going to Terabithia.

Thursday, Miss Edmunds ask Jesse to accompany her to Washington D.C. to visit the National Gallery and the Smithsonian. He has the best day of his life, being with his teacher and viewing great works of art.

He returns home and finds out Leslie is dead. She used the rope to swing over the creek, but it broke causing her to hit her head and drown. Jesse is stunned and disbelieving of the news.

He accompanies his parents to Leslie's house to express their condolences to her family. He cannot cry, instead he is angry. Angry that her parents are having her remains cremated, which means he won't see her again, and angry she has left him, just as she had opened up a new world for him. She told him about people, places, events, and ideas he had never heard of before.

He eventually finds a way to work through his feelings. Then he takes some planks left behind by her parents, after they moved back to Pennsylvania, and builds a bridge to Terabithia. He takes May Belle over the bridge and decides to make her the new queen.

This is a story of friendship, adversity, and the power of imagination. Jesse and Leslie have a friendship that is pure and strong. They help each other fight the bullies in their lives and give each other encouragement to follow their dreams. They create an imaginary country, Terabithia, where anything is possible. It is there after Leslie's death that Jesse takes his sister, so she too can find a secret place, where she can be free to follow her dreams.