In a world of anthropomorphic animals living in a forest called Hunter's Wood, a rabbit named Mama Watercress packs up her family's warren and leaves under cover of night. Her husband, Papa, has disappeared. With her older daughter Cress and baby son Kip, who clutches a stuffed carrot named Rotty, the family sets out for a new home. Kip cries "NO GO," while Cress stays silent, her words locked inside. As they eat grass beneath the moon, Cress thinks Papa would have loved this moment, then corrects herself to the past tense: Papa "would have loved" it.
The journey is perilous. Mama has lost her map, and the family freezes when Monsieur Reynard, a fox, passes with a dead hen in his mouth. They encounter Lady Agatha Cabbage, a vain skunk who wears a chinchilla around her neck as a living fur collar. Lady Cabbage tries to recruit Cress as her parlor maid, but Mama refuses. The skunk guides them to their destination, warning of a dangerous snake nicknamed the Final Drainpipe. The chinchilla whispers that Lady Cabbage is not as kind as she pretends.
They arrive at the Broken Arms, a towering dead oak whose trunk forks into two limbs resembling raised arms. Mr. Titus Pillowby Owl, the landlord, perches at the top, claiming to be blind but boasting keen hearing. Rent is ten dead moths per night. Mr. Owl promises to watch over the children while Mama forages for honey and ginger root, ingredients Kip needs for medicinal tea to treat his breathing problems. The basement flat is cramped, but Mama's rocking chair, teapot, and a portrait of Papa await them.
The tree houses several families: Manfred "Manny" Crabgrass, an elderly field mouse superintendent, and his wife Sophie; the Oakleaf squirrels, including Dr. Oakleaf, his wife Lolly, and their four sons, especially Finian (Finny); and the songbirds Romeo and Harriet. Manny warns Cress of three dangers: the Final Drainpipe; Tunk the Honeybear, who competes for honey; and Two Chimneys, a ruined human structure at the forest's edge. Mama begins weaving cloth on a floor loom, and each evening the family catches moths in candle wax for rent.
A late-spring snowstorm tests the family. While the children play outside making snow moths, Monsieur Reynard appears, but Mr. Owl drops a clot of snow on the fox's head, driving him off. When Finny reports that the honeybees are awake, Mama plans an overnight honey-gathering trip. Cress impulsively follows, tracking Mama to the beehive. As Mama climbs the branch with wax plugs in her ears, Tunk the Honeybear lumbers into the clearing. Cress blocks his path and bluffs, calling herself a "woodland spirit." She asks if he attacked her father; Tunk says he just woke from hibernation. Mama emerges and invites Tunk to take what honey he wants, then departs swiftly with Cress. Back home, Mama scolds Cress. Cress retorts that if Mama had gone with Papa to keep lookout, perhaps he would still be alive. Mama weeps. Cress is grounded for days. Dr. Oakleaf gives her sticky paper for drawing.
The Oakleaf family takes Cress rafting on a pond. When a dam of boulders collapses, floodwater carries the raft, with only Finny and Cress aboard, over a waterfall into unknown territory. A second waterfall destroys the raft, and the two wash ashore, lost. Cress spirals into despair, going rigid and silent. Finny bites her tail to snap her out of it, insisting Kip needs her. They chase each other through the woods until Cress's spirits return.
Lady Cabbage, her fur now dyed black for camouflage, captures them and leads them to Two Chimneys, the burned-out human house Manny warned about. She locks them in a basement wine cellar, insisting Cress will be her parlor maid. Cress proposes offering Mama's tapestries to decorate the scorched walls. Finny blows an emergency whistle, and Mama soon arrives, guided downstream by the songbirds. She forces Lady Cabbage to release them and agrees to sell the skunk her work later, since she has mouths to feed.
On the walk home, they rescue Fricassee Sunday, a young hen who fled a farm after misunderstanding the farmer's words as her name. At the Broken Arms, the community celebrates. But Cress watches from the shadows, reflecting that Papa is "even more gone," yet the world is dancing.
Fricassee begins laying eggs in the flat, but Mr. Owl raises the rent for the extra lodger while the family is already behind on payments. Cress erupts at the owl in rage, and the Oakleaf family restrains her. While foraging on the hillside, Cress meets Natasha "Nasty" Nasturtium, a brash, guarded young rabbit about her age whose family scattered when a human hunter appeared. Nasty has been alone ever since. Cress is captivated by Nasty's boldness, though Finny resents her rudeness.
Mama sends Cress to return a basket from an abandoned human picnic. Alone on the hillside, Cress senses the Final Drainpipe and hides under the basket, but her pursuer turns out to be Monsieur Reynard. She zigzags home at full speed. That night, Manny reveals Mr. Owl's secret: The owl was born with two broken wings and has never flown or left his perch, claiming blindness to explain why he never comes down. Later, Cress notices the moon has vanished and breaks down crying, telling Mama it is gone, "as gone as Papa." Mama holds her and explains that the moon always returns, and sorrow works the same way. Papa will not come back, but he has not left them as long as they remember him.
When Kip's fever spikes, Nasty brings word that Tunk is heading toward the Broken Arms. Fearing danger, Cress and Finny drape Mama's woven tapestries over the dead branches, transforming the tree into a "Tree of All Seasons." Tunk arrives carrying a glass bottle of rare medicinal honey. He has heard about Kip's illness from the songbirds and wants to help, saying he could not watch Cress lose her brother after losing her father. Mixed with ginger root, the honey clears Kip's lungs and breaks his fever. Cress drops her woodland spirit pretense and calls the Broken Arms "home" for the first time.
Lady Cabbage, now targeted by bald eagles after a conspicuous golden dye job, trades her chinchilla companion for one of Mama's shawls. The chinchilla, Willa, had been kept chained. Grateful for Mr. Owl's secret role in guiding Tunk to them, Cress organizes a party, hoisting herself to the owl's perch to invite him down. Mr. Owl accepts and is lowered to the ground for the first time in his life. The community gathers. Cress presents her sticky papers, each bearing a hand-drawn musical note, hung on a giant spiderweb. She tells Mr. Owl she wrote him a song, and the songbirds perform it.
Time passes. Fricassee moves to Two Chimneys as Lady Cabbage's companion on equal terms. Willa goes to live with Nasty in the warren Nasty has claimed across the hill. Kip outgrows his breathing problems and learns to talk. One evening, Cress asks if Kip remembers Papa. Kip says he remembers when Cress tells stories, and Cress realizes storytelling helps her remember, too. She pulls her musical-note papers from the spiderweb and writes on the backs, setting down the story of how her family came to Hereabouts, her name for the neighborhood she has accepted as home. In a metafictional closing, she describes Papa: He was nice, he liked carrots, he was ordinary, "more than good enough," and he loved his family. She signs it "By Papa's daughter, Cress Watercress." It is her first try.