Ponyboy Curtis lives with his brothers Sodapop and Darrel on the East side of town. They are greasers, which means they wear their greased hair long and don't follow the rules. The brothers live alone, because their parents died in an automobile accident. They have a group of friends, a gang, who they depend on, it includes Two-Bit Mathews, Johnny Cade, Steve Randle, and Dallas Winston, Dally.

One night, at the drive-in movies, Dally decides to harass two Socs girls. The Socs are the wealthy teenagers who live on the West side of town. The Socs boys enjoy harassing the greasers. Ponyboy and Johnny are with Dally and when he takes his harassment too far Johnny stops him. The girls, Cherry Valance and Marcia, appreciate it and decide to strike up a conversation with the boys. Cherry explains to Ponyboy that even though Socs have money, they have problems just like greasers do, which is a unique thought for Ponyboy.

Two-Bit shows up at the drive-in and offers to give the girls a ride home in his car. On the way to Two-Bits home, to pick up his car, the girls' boyfriends show up in their car. They start to argue with the boys, so Cherry decides to go with them to prevent a fight. Her boyfriend, Bob, is the same person who previously beat Johnny so badly that he lives in a state of perpetual fear.

Later that evening, after having a fight with Darry, Ponyboy and Johnny go to a park so he can cool down. The Socs boys from earlier in the night find them and attempt to drown Ponyboy in a fountain. Johnny, in order to save Ponyboy and avenge his beating, stabs Bob, one of the Socs, to death.

The two boys ask Dally for help and he gives them money, a gun, and directions to a church they can hide in. The boys hide out in the abandoned church, until Dally arrives to see how they are doing. Johnny tells him he has decided the best thing for them to do is to return to town and turn themselves in to the police.

They have gone out to eat and upon returning to the church, find a group of school children and teachers there. The church is on fire and some of the students are trapped inside, so Johnny and Ponyboy go inside to save them. They feel the fire is their fault, because they smoked in the church. They save the children, but Dally and Johnny are injured as they try to escape from the burning church. Dally had entered the church to save Johnny and Ponyboy.

At the hospital, Ponyboy tells one of the teacher's the truth about the fire and the murder. The teacher explains they might not be in much trouble now that they are heroes.

After being reunited with his brother, Ponyboy finds out Dally is going to survive his injuries, he has a burned arm, but Johnny might not survive. Johnny has a broken back and third-degree burns.

The Ponyboy and Johnny are being praised as heroes, but they must face a judge for their previous actions. This might result in Ponyboy and Sodapop being placed in a boys' home. A more pressing worry is the impending fight between the Socs and greasers. Ponyboy is determined to fight, even though he is running a fever.

He sees Randy, Bob's friend, at the Tasty Freeze, Randy tells Ponyboy he will not fight because of Bob's death and he sees the fight as a no win situation. This conversation makes Ponyboy view Randy in a different light.

During a visit to the hospital, Two-Bit and Ponyboy realize Johnny might not survive. They also visit Dally who asks for Two-Bit's switch blade.

The night of the fight Dally uses the switch blade to escape the hospital, so he can fight. Ponyboy is badly beaten, but the greasers do win the battle.

Afterward Dally takes Ponyboy to visit Johnny. They arrive as Johnny is dying. Dally runs away from the hospital, leaving Ponyboy to walk home. He arrives home feeling dizzy and upset. He informs his brothers and the rest of the gang of Johnny's death. Then Dally calls telling them he has robbed a grocery store and is being pursued by the police; he wants them to come to help him. They arrive in time to see him shot to death by the police, as he points an unloaded gun at them.

Ponyboy then faints and they take him to the hospital, where he is later released to his brothers. They stay by his side for four days as he lies delirious. Ponyboy recovers slowly from his physical injuries, but his emotional injuries linger. An example of this is his response to a statement by Randy during a visit. Randy tells Ponyboy Johnny killed Bob, but Ponyboy insists he did it.

At the court hearing, Ponyboy is acquitted of all charges and allowed to stay with Darry. His life doesn't return to normal, as he has trouble remembering things, becomes argumentative, and his grades slip. His English teacher tells him he will give him a C, if he writes a good semester theme paper.

After an argument between Ponyboy and Darry causes Soda to run from the house, the brothers agree they need to stick together. Then Ponyboy is able to face the fact Johnny killed Bob and he is dead. He also knows he needs to write about his friends' deaths and life as a greaser, for his semester theme paper.

Ponyboy is a young man trying to find his place in the world. The awful reality of Bob, Johnny, and Dally's deaths take a toll on him physically and emotionally. But in the end, his brothers make him realize family is important. He also feels it is important to tell the story of life as a greaser, so others can understand who they really are.