Cole is a fifteen-year-old juvenile delinquent from Minneapolis. Cole's parents are no better than he is. His father, an angry alcoholic, constantly beats Cole while his mother, a quiet trophy wife, witnesses the beatings and does nothing to stop them. All his life, Cole has been referred from therapist to therapist, and from detention center to detention center. After Cole seeks vengeance on a boy named Peter who heard about him breaking into a hardware store by ruthlessly beating him, Cole realizes that he may not have any more chances in life. Faced with a possible lengthy jail sentence and a trial in court as an adult for his crimes, Cole seeks out any alternative that he can find. His parole officer, Garvey, suggests that he try a Native American method called Circle Justice. Garvey, being a Native American of the Tlingit tribe, knows that Circle Justice could change Cole's attitude towards life and others permanently, but he questions Cole's sincerity when Cole tells him that he really does want change. Cole is sentenced to one year on an island off the coast of southeast Alaska.
Cole soon arrives on the island on a skiff with Garvey and Edwin, a Tlingit tribe elder. As the three arrive on the island, Garvey and Edwin unload boxes which carry food, survival supplies, and schoolwork for Cole to complete. Once they are done setting up inside the small log cabin that Edwin built before Cole came to the island, Garvey and Edwin give Cole warnings about what he might expect on the island. They also mention the existence of a Spirit Bear, an all-white black bear that lives off the coast of British Columbia. They tell Cole that the bear has more pride and honesty than most humans. Cole proudly replies by stating that if he saw a Spirit Bear, he would kill it.
The two men depart from the island, and Cole feels completely free at last. He feels his anger beginning to build up inside him as he thinks back and remembers everyone who has ever wanted to get rid of him. This leads to him burning down the log cabin Edwin and Garvey made. The next day he sees a massive all-white black bear which he assumes must be the Spirit Bear. The bear is far away, but Cole tosses rocks at it so he could teach the bear to fear him. The bear does not flinch, and when Cole looks back, the bear has vanished. This happens multiple times, until finally he runs to get his knife and a spear that he has fashioned. When he gets back, Cole begins to inch towards the bear and decides that he must try to kill it. After Cole's failed attempt at executing the beast with his handmade spear, the bear charges at him, and a violent mauling ensues. The bear's attack breaks multiple ribs, an arm, and a pelvis. Soon after, the bear leaves Cole alone and unable to move. Cole curiously notices a nest of sparrows on a tree, in which contained a mother and her young. Cole feels hatred towards them due to its reminder of his whole life. Afterwards, he drifts in and out of consciousness as a violent storm strikes the island and knocks down a tree that nearly falls on Cole. He realizes that the fallen tree was the specific one in which the sparrow nest was perched on, and Cole is able to see, through the dark night, the remains of the destroyed nest. This makes Cole feel sympathy towards the baby sparrows. Later, the Spirit Bear appears twice but makes no advance. Cole realizes that the bear is only curious, and was merely defending itself. Cole quickly becomes hungry and must eat anything he can find, including worms, bugs, and a mouse. The pain of his torn flesh and broken limbs becomes nearly unbearable, and he realizes that his life up until then has been insignificant. He desperately wants to be part of the cycle of nature at that moment, but he knows that his desire for life might be too late. As he lies helplessly on the ground, Cole accepts death because he is happy that he was able to trust and be trusted by nature in his last moments. Once the Spirit Bear returns to his ground, Cole spits at it, and decides for himself that there is nothing more he can do, and waits for the Spirit Bear to attack and finish him off. He is just on the verge of death when he is rescued by Edwin and Garvey when they come to check in on him.
After six months of physical therapy, the 'Circle Justice' comes together and discusses Cole's actions during his banishment in which he tried to escape the island, burned his shelter down, and many other negative acts he committed. As he was told earlier, he was most likely to face a jail sentence this time, but Edwin, the Tlingit Elder, uses Cole in an insignificant demonstration. After Cole attempts to convince the circle again that he has changed and admits that what he did was stupid, they clear up all this confusion by sentencing Cole to more time on the island. Cole is at first reluctant due to his injuries he received from the mauling. Garvey and Edwin accompany him for a short time and introduce him to many new spiritual concepts. When they soon leave him alone, Cole is fearful of the Spirit Bear returning. He later thinks he can help Peter when Peter wants to commit suicide, and he wants Peter to come to the island so they can be healed together. They agree and the book ends with both of them seeing Spirit Bear. Following their sighting, the two draw the symbol of a circle on their respective totem poles, to represent the beginning and the end of their journey together.