The novel, like the movie, follows the story of Dorothy, a young girl who lives with her aunt, uncle, and dog Toto on a farm in Kansas. One day a cyclone sweeps up the farmhouse. Dorothy and Toto are caught inside the house, but they survive the storm. When the house is set down again, Dorothy and Toto find themselves in Munchkin Country, located in Oz. The house lands on the Wicked Witch of the East, killing her.
The Munchkins are delighted to be freed from their evil ruler. The Good Witch of the North gifts Dorothy the Wicked Witch of the East's silver shoes. While the Munchkins are very hospitable, Dorothy wants to return home. In order to do so, the Good Witch of the North tells her that she has to go to Emerald City and ask the Wizard of Oz for help.
As Dorothy follows the yellow brick road, she meets a handful of people all suffering from lack of confidence: a Scarecrow, a Tin Woodman, and a Cowardly Lion. The Scarecrow wants a brain so he will be smarter, the Tin Woodman wants a heart so he will be more empathetic, and the Cowardly Lion wants courage so he will be more brave. The four of them continue to the Emerald City to ask the Wizard to solve their problems, but the path is not without obstacles. They have to go through a forest filled with Kalidahs (bear-tigers), a field of poppies that cause Dorothy and the Cowardly Lion to fall asleep, and a river.
Eventually they arrive at the Emerald City, where the Wizard of Oz appears differently to each of them. To Dorothy, the Wizard appears to be a giant floating head, which is how he is portrayed in the film. But the Scarecrow, Tin Woodman, and Cowardly Lion see the Wizard as a beautiful woman, a beast, and a ball of fire. Before the Wizard will help any of them, he insists that they kill the Wicked Witch of the West.
Dorothy and her friends travel to Winkie Country, which the Wicked Witch rules. On the way, the Wicked Witch tries to kill them. She sends wolves, crows, bees, and Winkie soldiers, but when all these fail, she turns to the Winged Monkeys to do her bidding. The Winged Monkeys were enchanted a long time ago by a sorceress they offended. Now they have to grant anyone who wears the enchanted Golden Cap three wishes. Unfortunately for Dorothy and her friends, the Wicked Witch possesses the Golden Cap currently. The Winged Monkeys, under the Wicked Witch's control, capture Dorothy, Toto, and the Cowardly Lion. The Winged Monkeys disassemble both the Tin Woodman and the Scarecrow.
The Wicked Witch makes Dorothy do all the chores. She wants the silver shoes that the Good Witch of the North gave Dorothy after she killed the Wicked Witch of the East. Dorothy discovers how to defeat the Wicked Witch when she angrily dumps a bucket of water on the witch and she melts. The Winkies are thrilled to be freed of their evil tyrant. The Winkies, Dorothy, and the Cowardly Lion reassemble the Tin Woodman and the Scarecrow. The King of the Winged Monkeys feels bad about what he did to Dorothy and her friends, but explains that he was forced to obey the Wicked Witch because she possessed the Golden Cap. With the Wicked Witch dead, Dorothy inherits the Golden Cap. She uses the power of the Golden Cap to ask the Winged Monkeys to give her friends and her a lift back to the Emerald City, although the Tin Woodman promises to return to rule the Winkies at their request.
Even though they did what he asked, the Wizard of Oz is reluctant to help Dorothy and her friends. Toto knocks over his equipment, exposing the Wizard as a man from Nebraska who was swept to the Land of Oz in a hot air balloon. Even though the Wizard doesn't have any real magic, he gives the Scarecrow, Tin Woodman, and Lion tokens that represent their desired attributes: brains, a heart, and courage, respectively. Their faith in the Wizard and their own proven ability give them the confidence they need to be how they want to be.
The Wizard and Dorothy build a new hot air balloon to return to Kansas. They leave the Scarecrow in charge of the Emerald City. Before Dorothy can get into the balloon, Toto runs into the crowd. While chasing him, the rope holding the balloon down gives away and the balloon takes off without either Dorothy or Toto. Devastated, Dorothy asks the Winged Monkeys to give her a lift back to Oz, but they explain that it is not within their power to do so.
In the end, Dorothy decides to ask Glinda, the Good Witch of the South, how to get home. Her friends go with her and they encounter many more obstacles, including the Fighting Trees, Mr. Joker, a giant spider that rules a forest, and the armless Hammer-Heads. Dorothy utilizes the Golden Cap one last time to ask the Winged Monkeys to carry her and her friends over the dangerous Hammer-Heads. When they finally arrive at Glinda's castle, Glinda tells Dorothy that all Dorothy has to do to go home is tap her silver shoes.
Dorothy, having used up her three requests, gives the Golden Cap to Glinda. Glinda orders the Winged Monkeys to take each of Dorothy's friends back to their respective kingdoms, including delivering the Lion to the forest where the giant spider ruled before he defeated it. Then she tells the King of the Winged Monkeys that she will give him the Golden Cap so that no one will ever control them again. After Dorothy says goodbye to her friends, she taps her heels and returns home to Kansas with Toto.