Stanley Yelnats IV is convicted of theft and arrives at Camp Green Lake, which has no lake. He learns the rules: one hole per day, five feet wide, five feet deep. If you find anything interesting, you tell the Warden first.

Stanley meets the boys of Group D, begins the brutal daily routine of digging, and finds a gold tube with the letters K.B. engraved on it. He gives it to X-Ray as a political favor, not realizing its significance.

The first full backstory timeline: Green Lake, Texas, 110 years earlier. Schoolteacher Katherine Barlow falls in love with Sam the onion man. The town's white residents, led by land owner Trout Walker, burn the schoolhouse and murder Sam. Kate becomes Kissin' Kate Barlow.

In Latvia, the poor young Elya Yelnats asks Madame Zeroni to help him win Myra Menke's hand in marriage. Zeroni gives him a piglet and instructs him to carry it up the mountain while singing to it daily. When Elya sails for America without fulfilling his promise to carry Zeroni up the mountain, he dooms his descendants with bad luck.

Stanley and Zero develop an informal trade: Stanley teaches Zero to read; Zero digs part of Stanley's hole each day. Mr. Pendanski's public humiliation of Zero pushes him to violence — Zero hits Pendanski with a shovel and runs into the desert. The camp erases his records.

Stanley steals the water truck and follows Zero into the desert, finding him collapsed under an overturned boat named Mary Lou. They survive on Sploosh — canned peaches — and begin the trek toward 'God's thumb,' the mountain Stanley has seen in the distance.

Stanley and Zero survive atop the mountain, finding onions and a freshwater spring. Zero, delirious, begins to remember fragments of a lullaby. Stanley realizes the lullaby is connected to his family. The boys recover and decide to return to the camp at night to find the treasure.

The third Kate Barlow timeline closes: after years of outlawry, Kate returns to Green Lake. Trout Walker and his wife force her to reveal the treasure's location or face death by yellow-spotted lizard. Kate lets the lizard bite her, laughing — because the lake has been dry for twenty years and will stay dry until the Walkers and all their heirs are gone.

Stanley and Zero return to camp at night and dig up the treasure chest — in the very first hole Stanley dug. The Warden and guards arrive. The boys are covered in yellow-spotted lizards, who won't bite them because of the onions in their blood. They wait out the night.

Stanley and Zero are released. The Warden's land is converted to a nature preserve — and it rains for the first time in over a century. Stanley's family gets the treasure (enough to fund his father's invention and a new house). Zero finds his mother. The holes fill with water. The peach trees bloom.