In 1885, in Lahour, India, Kim, a young, white street orphan, survives by begging and stealing while dressed like a native.  One night, Kim delivers a message to the beautiful Laluli from Mahbub Ali, or "Red Beard," a spy for the British Secret Service who is posing as a horse trader.  Through Kim, the womanizing Red Beard asks Laluli to meet him the following evening and she gladly accepts.  Unknown to Kim, Laluli is plotting with Hassan Bey and other Russian-backed rebels who have been trying to foment war with the British-run Indian government, and plans to steal a document from Red Beard, which shows the five points at which the rebels plan to attack the English Army.

The next day, on the street, Kim notices an oddly dressed priest and, curious, asks him about his background.  After the elderly man reveals that he is a lama from Tibet on a mission to find the "River of the Arrow," Kim offers to beg for him as his "chela," or disciple.  Kim then admits that just before dying, his father predicted that Kim would find a "red bull on a green field."  The Lama suggests that Kim journey with him to Ambala to search for the red bull, and although Kim is intrigued by the holy man, he tells Red Beard that he would rather travel with him to Benares.  Red Beard, however, convinces Kim to go with the Lama and deliver the rebels' document to Colonel Creighton, the English leader of the Secret Service operation, which has been dubbed "The Great Game."

That night, Red Beard, guessing Laluli's scheme, pretends to pass out from drink and spies on her and Hassan Bey as they search his belongings for the document.  The next day, after traveling with the Lama by train to Ambala, Kim delivers the paper to Creighton, who has learned from English spies Huree Chunder and Lurgan Sahib that the rebels are about to attack.  Kim then continues his journey with the gentle lama and becomes a genuine disciple.  Eventually, the two come upon Creighton's troops, whose flag consists of a red bull painted against a green background.  Realizing that his father's prediction has come true, Kim approaches Father Victor, a priest attached to the unit, and shows him his birth certificate, which he has carried with him since his father's death.  Father Victor identifies Kim as the son of Kimball O'Hara, a soldier he once knew, and the Lama is startled to learn that Kim is a "sahib," or white person.  Although the Lama insists that Kim must now be with "his own people," he pledges to pay Kim's way through St. Xavier, the best English military school in India.  Creighton, however, sends Kim to an orphanage school in Ambala, where Kim quickly grows bored and escapes with the help of Red Beard.  Red Beard then delivers Kim to Creighton, whose troops have scared off the rebels, and to the Colonel's surprise, the promised tuition check arrives from the Lama.

After a brief reunion with the Lama, Kim enrolls in St.  Xavier, and there struggles to learn the strict rules of white military society.  As soon as summer arrives, Kim sneaks off to Red Beard's camp and discovers Hassan Bey posing as a beggar.  Kim then overhears the rebel plotting with Red Beard's head man, Abul, to assassinate Red Beard.  Kim manages to warn Red Beard about the plot, and the rebels are executed.  Now schooled in the brutality of Red Beard's world, Kim is sent to Lurgan, who instructs him in various spy techniques, including how to avoid being hypnotized.  Soon, Kim is asked to deliver a message from Huree, who is being followed by three rebel spies, to Creighton.  Eluding the spies, Kim safely delivers the message, in which Huree warns that two Russians posing as geologists are collecting military data in the Khyber Pass, and is entrusted with Creighton's reply.  When Kim arrives at the rendezvous spot, however, he finds Huree dead and flees.

Two weeks later, Red Beard, posing as a goat herder, shows up at Russians' camp in the Khyber Pass and is surprised to find Kim and the Lama there.  Kim has ingratiated himself with the Russians and encouraged them to believe that the Lama, who is still searching for the River of the Arrow, is demented.  After Kim surreptitiously informs Red Beard that he has located the Russians' maps and data, which Huree was to steal, an Indian emissary arrives at the camp.  The emissary quickly becomes suspicious of Kim and attempts to hypnotize him.  Recalling Lurgan's lessons, Kim resists, but his mental strength only serves to convince the emissary that he is indeed a spy.  The emissary beats the Lama and tries to torture information out of Kim, but Red Beard sneaks up on him and kills him.  Red Beard then holds the Russians at gunpoint, but after Kim discovers that a group of rebels is nearby, the Russians overwhelm Red Beard and rush to warn their comrades.  With Kim's help, Red Beard manages to stop the Russians and causes a rockslide, which wipes out the approaching rebels.

Later, Kim tearfully apologizes to the wounded lama for using him, but the holy man assures his disciple that everything has happened for a reason.  Then, after advising Kim to pursue a non-violent path, the Lama takes a few stumbling steps and has a vision of a beautiful river.  Declaring that he has found the River of the Arrow, the Lama collapses in the dry mountain terrain and dies.