Billy is a ten-year-old boy whose only desire is to own a pair of coon hounds, but his family can't afford the seventy-five dollars for a pair of hounds. Billy finds a magazine with an advertisement for coon hounds at the price of twenty-five dollars for each hound. By working hard for two years, Billy manages to save the money for the hounds.

His grandpa arranges a ride for Billy to the train depot so he can pick up his dogs, but Billy is impatient. He decides to walk the twelve miles to town by himself to retrieve his hounds. He leaves without telling his family his plan. He then retrieves the dogs and starts the journey home.

When he returns home, his parents are not angry with him, instead they are grateful he has returned home safely. Billy explains to his mother he feels God helped him get his hounds.

Billy's father informs him and his sisters they plan to move to the family to town as soon as they can afford it, so the children can go to school.

Billy, with the help of Grandpa manages to catch a ringtail raccoon, so he can use its hide to teach the pups how to hunt. After weeks of training the pups are ready to hunt on the first day of hunting season. Billy promises Papa he will tell him where he is hunting each night.

The first night the dogs, Old Dan and Little Ann, tree a raccoon in the largest tree in the woods. Billy promised his dogs if they treed the coon, he would do the rest. So, Billy must chop the large tree down to get to the raccoon. He works at it all night and his father finds him still working the next morning. Billy explains he can't come home because he has a promise to keep. After asking for God's help a wind comes up and knocks the tree down, allowing Billy to keep his promise.

Billy becomes raccoon hunting crazy and goes out almost every night to kill as many as he can. Grandpa starts to brag to the other hunters about Billy's success in hunting. One day the Pritchard boys approach Billy with a bet. They are willing to bet two dollars his dogs can't tree the "ghost coon". Grandpa puts up the money for the bet, so Billy and the dogs try to catch the raccoon. He seems to lose them in a tree, but Billy will not give up on his dogs. The mean Pritchard boys want Billy to pay up now, but Billy gives his dogs a little longer to find their quarry.

The dogs tree the raccoon, but Billy doesn't want to kill it. The Pritchard boys tell him the dogs must kill it. The Pritchard's mean dog enters the area, and starts a fight with Billy's dogs. They are taking the hound down, so Rubin Pritchard takes Billy's ax to defend his dog. He trips while running and is killed as the ax is embedded in his stomach. Billy is filled with grief and guilt about the incident.

Soon after, Grandpa tells Billy he has entered Billy's hounds in the Championship Coon Hunt, which makes Billy happy. Together with Papa, the three of them set out with the dogs for the competition.

Once at the competition, Billy begins to feel unsure about his dogs, because they are smaller than the other dogs. Grandpa has Billy enter Little Ann into the beauty competition and she wins. The other hunters are impressed by the hounds and by Billy, because he is so earnest and young.

The night Billy and the dogs hunt in the preliminary round they kill three coons, which qualifies them for the runoff. The winner of the runoff wins the championship.

The night of the runoff the two hounds, which besides being the smallest dogs in the competition are also the most bonded pair, tree a raccoon right away. Then a storm comes in bring sleet and high winds, which makes the older men desire to turn back to camp. Billy is unwilling to leave his dogs and he refuses to return to camp. Grandpa, while walking with the group, falls, and sprains his ankle, so they are forced to camp for the night.

The dogs, after killing three coons, take off in the storm after another raccoon. The next morning the other hunters find Billy and the others. Billy is told his dogs are frozen, but alive. They, after being thawed out, kill last coon and Billy wins the gold cup and 300 dollars in jackpot winnings. This money is given to his father.

After returning home, Billy continues to hunt with his hounds. One day they tree a mountain lion, who fights back, severely injuring the hounds. Little Ann is able to recover from her injuries, but Old Dan dies from his. Little Ann stops eating and is found dead on Old Dan's grave. Billy is overcome with grief.

That night Papa tells the children, the family, thanks to Billy's winnings, now has enough money to move into town. On moving day Billy returns to his dogs' graves and sees a red fern is growing between the two graves. It is said in the Ozarks an angel plants a red fern and the spot where it grows is sacred, this makes Billy feel better about leaving his beloved hounds behind.

This is a story of enduring love between a teenage boy and his hounds. He is willing to give his life for his hounds and they do give their lives for him. He is forever changed by the experiences he has with his hounds, which shape him as a person. His whole family benefits from the innate hunting abilities of Old Dan and Little Ann. Their ability to win the Championship Coon Hunt brings in the money necessary for the family to move to town and allow the children to go to school.