Bud, Not Buddy centers around Bud Caldwell, a 10 year old orphan who has grown up in Flint, Michigan. The book opens in 1936, four years after Bud's mother's death. Bud has just been placed with the Amoses, his third foster family. Unfortunately, the Amoses' son Todd bullies Bud, causing Bud to escape.
Bud decides to run away from his foster home in the hope of finding a permanent home and a better life. He brings with him mementos of his mother - a bag of stones, a special blanket, a childhood photograph of his mom, and fliers for a jazz band, the Dusky Devastators of the Depression, and their leader Herman E. Calloway. Bud decides that he should try to find Calloway, who he thinks might be his father.
Bud and Bugs, another orphaned boy, team up and go to the shantytown (or Hooverville) so they can hop a California-bound train and hopefully get jobs in the West. However, Bugs makes it onto the train and Bud doesn't, so Bud returns to Flint, where a librarian gives him instructions for getting to Grand Rapids and finding Calloway. Bud begins the long hike from Flint to Grand Rapids, but on the way there, he runs into Lefty Lewis, who cajoles Bud, using food, into accepting a ride and help. Lewis provides Bud with a real bed to sleep in for the night, and a ride to Grand Rapids.
Upon reaching Grand Rapids, Bud finds the Dusky Devastators of the Depression, the band which his father is a member of. Though his father rejects him, the other band members, including saxophone player Steady Eddie and band leader Herman E. Calloway, take more kindly to Bud and give him some dinner. Eventually, Bud finds out that Calloway is his grandfather, and he finds the home he wants with the jazz band. When Bud tells his remaining family members of his mother's death, it causes much sadness.
The book closes with Bud at the Calloway home, happy and busy learning how to play his gift from Steady Eddie, a new saxophone. Bud then finds out that his new room was once his mother's room.