Dorothy is a young orphaned girl raised by her Uncle Henry and Aunt Em in the bleak landscape of a Kansas farm. She has a little black dog Toto, who is her sole source of happiness on the dry, gray prairies. One day the farmhouse, with Dorothy and Toto inside, is caught up in a cyclone and deposited in a field in Munchkin Country, the eastern quadrant of the Land of Oz. The falling house kills the evil ruler of the Munchkins, the Wicked Witch of the East.

The Good Witch of the North comes with the Munchkins to greet Dorothy and gives Dorothy the silver shoes (believed to have magical properties) that the Wicked Witch had been wearing when she was killed. In order to return to Kansas, the Good Witch of the North tells Dorothy that she will have to go to the "Emerald City" or "City of Emeralds" and ask the Wizard of Oz to help her. Before she leaves, the Good Witch of the North kisses her on the forehead, giving her magical protection from trouble.

On her way down the road of yellow bricks, Dorothy frees the Scarecrow from the pole he is hanging on, restores the movements of the rusted Tin Woodman with an oil can, and encourages them and the Cowardly Lion to journey with her and Toto to the Emerald City. The Scarecrow wants to get a brain, the Tin Woodman a heart, and the Cowardly Lion, courage. All four of the travelers believe that the Wizard can solve their troubles. The party finds many adventures on their journey together, including overcoming obstacles such as narrow pieces of the yellow brick road, vicious Kalidahs, a river, and the Deadly Poppies.

When the travelers arrive at the Emerald City, they are asked to wear green spectacles by the Guardian of the Gates as long as they remain in the city. The four are the first to ever successfully meet with the Wizard. When each traveler meets with the Wizard, he appears each time as someone or something different. To Dorothy, the Wizard is a giant head; the Scarecrow sees a ball of fire; the Tin Woodman sees a beautiful woman; the Cowardly Lion sees a ravenous beast. The Wizard agrees to help each of them—but only if one of them kills the Wicked Witch of the West who rules over the western Winkie Country. The Guardian of the Gates warns them that no one has ever managed to harm the very cunning and cruel Wicked Witch.

As the friends travel across the Winkie Country, the Wicked Witch sees them coming and attempts various ways of killing them:

First, she sends her 40 great wolves to kill them. The Tin Woodman manages to kill them all.

Then the Wicked Witch of the West sends her 40 crows to peck their eyes out. The Scarecrow manages to kill them by grabbing them and breaking their necks.

Then the Wicked Witch summons a swarm of bees to sting them to death. Using the Scarecrow's extra straw, the others hide underneath them while the bees try to sting the Tin Woodman.

Then the Wicked Witch of the West uses her Winkie soldiers to attack them. They are scared off by the Cowardly Lion.

Using the power of the Golden Cap, the Wicked Witch of the West summons the Winged Monkeys to capture Dorothy, the Cowardly Lion and Toto, and to destroy the Scarecrow and the Tin Woodman. This plan is successful, and the survivors are carried to the Witch.

The Wicked Witch forces Dorothy to do housework for the castle, all the while scheming to steal Dorothy's magical shoes. She also locks up the Lion without food until he will submit to being a pack animal (he never does, as Dorothy sneaks him food at night).

When the Wicked Witch gains one of Dorothy's silver shoes by trickery, Dorothy in anger grabs a bucket of water and throws it on the Wicked Witch. To her shock, this causes the Witch to melt away, allowing Dorothy to recover the shoe. The Winkies rejoice at being freed of the witch's tyranny, and they help to reassemble the Scarecrow and the Tin Woodman. The Winkies love the Tin Woodman, and they ask him to become their ruler, which he agrees to do after helping Dorothy return to Kansas.

Dorothy, after finding and learning how to use the Golden Cap, summons the Winged Monkeys to carry her and her companions back to the Emerald City. and the King of the Winged Monkeys tells how he and the other monkeys were bound by an enchantment to the cap by the sorceress Gayelette.

When Dorothy and her friends meet the Wizard of Oz again, he tries to put them off. Toto accidentally tips over a screen in a corner of the throne room, revealing the Wizard to be an ordinary old man who had journeyed to Oz from Omaha long ago in a hot air balloon. The Wizard has been longing to return to his home and be in a circus again ever since.

The Wizard provides the Scarecrow with a head full of bran, pins, and needles ("a lot of bran-new brains"), the Tin Woodman with a silk heart stuffed with sawdust, and the Cowardly Lion a potion of "courage". Because of their faith in the Wizard's power, these otherwise useless items provide a focus for their desires. In order to help Dorothy and Toto get home, the Wizard realizes that he will have to take them home with him in a new balloon, which he and Dorothy fashion from green silk. Revealing himself to the people of the Emerald City one last time, the Wizard appoints the Scarecrow, by virtue of his brains, to rule in his stead. Dorothy chases Toto after he runs after a kitten in the crowd, and before she can make it back to the balloon, the ropes break, leaving the Wizard to rise and float away alone.

Dorothy turns to the Winged Monkeys to carry her and Toto home, but they cannot cross the desert surrounding Oz, subsequently wasting her second wish. The Soldier with the Green Whiskers advises that Glinda, the Good Witch of the South, may be able to send Dorothy and Toto home. Dorothy, Toto, the Scarecrow, the Tin Woodman, and the Cowardly Lion journey to Glinda's palace in the Quadling Country. Together they escape the Fighting Trees, tread carefully through the China Country where they meet Mr. Joker, and dodge the armless Hammer-Heads on their hill. The Cowardly Lion kills a giant spider who is terrorizing the animals in a forest and he agrees to return there to rule them after Dorothy returns to Kansas. Dorothy uses her third wish to fly over the Hammer-Heads' mountain, almost losing Toto in the process.

At Glinda's palace, the travelers are greeted warmly, and it is revealed by Glinda that Dorothy had the power to go home all along. The Silver Shoes she wears can take her anywhere she wishes to go. She tearfully embraces her friends, all of whom will be returned, through Glinda's use of the Golden Cap, to their respective kingdoms: the Scarecrow to the Emerald City, the Tin Woodman to the Winkie Country, and the Cowardly Lion to the forest. Then she will give the Golden Cap to the King of the Winged Monkeys, so they will never be under its spell again. Having bid her friends farewell one final time, Dorothy knocks her heels together three times, and wishes to return home. When she opens her eyes, Dorothy and Toto have returned to Kansas to a joyful family reunion.