Ponyboy and Johnny are settling down to life in the church. Johnny made his way into town to pick up some provisions. Ponyboy is happy to see the food and supplies, but he isn't happy about the bottle of peroxide.

He knows Johnny wants to use it to dye his hair blond. Ponyboy's hair is a point of pride for him. He likes that it is long and silky and he doesn't need to put much grease in it, to make it stay in place. He feels as if it is his best feature and the thought of cutting and dying it is abhorrent to him. Johnny explains he feels by now their pictures are in the papers, so they need to change their looks. He tells Ponyboy hair can grow back, but getting caught means going to jail, where the first thing they do is cut your hair.

Ponyboy gives in and lets Johnny cut his hair and dye it blond, making him unrecognizable. Ponyboy then cuts Johnny's hair and Johnny washes the grease out of his hair and combs it differently. They don't look like any photo which could be printed of them in the newspaper.

Ponyboy starts to recall the events of the previous evening, but it is too much for Johnny to endure. He doesn't know how he is going to live with the knowledge, he took another person's life. He didn't mean to kill Bob, he just wanted him to stop drowning Ponyboy, but fear overcame him and he stabbed the young man.

The two of them realize fully what the actions of the previous night mean for them and their families. They know they will have to spend their lives in hiding. This means their families will never know where they are or even if they are alive. After both cry about their situation, they come to the conclusion they need to go on with their lives.

Dally shows up after they have been waiting four or five days in the church. He gives Ponyboy a letter from Sodapop, which says miss him and want him to come home to face the consequences of his actions, but he knows that isn't going to happen.

Dally tells them he was taken to the police station for questioning and he told them Johnny and Ponyboy are headed to Texas. He also tells them it is all out war between the greasers and Socs. It so dangerous that greasers can't walk alone anymore and he has taken to carrying a gun.

A fight is scheduled between the two groups and if the greasers win, then the Socs must leave greaser territory. Dally also informs them Cherry Valance is spying on the Socs for the greasers.

The boys can't believe Cherry is going to help the greasers. Dally explains she showed up one day, to tell them she feels the fight and death of Bob are all her fault. She is willing to testify that the Socs were drunk and Johnny stabbed Bob in self-defense. She is also willing to keep the greasers informed of what the Socs intend to do in the fight between the two groups.

Johnny then surprises Dally and Ponyboy, by announcing he and Ponyboy are going back to town to turn themselves in to the police. He can't stand the thought of the two of them living their lives on the run. Dally tries to tell him jail is especially hard for greasers. Dally is afraid jail will turn sweet Johnny into a cold person like himself.

Johnny asks if his parents are asking about him, but Dally has to tell him, no. This hurts Johnny, for all he ever wants is for his parents to show him some sign of affection, but they always let him down.

Johnny admits he is afraid of going to jail, but he thinks with Cherry's testimony and his lack of criminal record he might receive a lenient sentence. As they drive back to the church, from visiting the local Dairy Queen, the boys see the church is on fire. Ponyboy and Johnny know the fire is probably their fault, because they smoked in the church.

A group of school children and their teachers are at the church on a picnic. It is as they talk to the boys about the fire, that one of the teachers informs them a group of students are missing and probably in the church.

Before anyone can stop them, Ponyboy and Johnny make their way into the burning church. They are determined not to have the deaths of the children on their heads. They battle the smoke and flames to find the children in a back room. Then they begin to drop them one by one through a broken window. As the last child is put through the window, the roof starts to collapse. Ponyboy is pushed out the window and rendered unconscious by Dally, as he tries to return to save Johnny. Then Dally rescues Johnny, and all three of them are taken to the hospital.

One of the teachers stays with Ponyboy, who is only suffering from bruises and a few burns. Ponyboy tells him the whole story of the murder and the teacher explains they might not be in any trouble, after the story of their heroics becomes public. While Ponyboy is waiting in the hospital, Sodapop and Darry arrive. Darry is crying, because he is happy to see his brother alive, which makes Ponyboy realize the reason Darry has been so hard on him is because he loves him and can't stand to lose another family member.

Ponyboy and Johnny spend time in an abandoned church contemplating their actions and their future. Just as they decide they must face the authorities, they find themselves in another desperate situation. They become emboldened, because of their need to act responsibly, and save the lives of some children, but Johnny is injured during the rescue.