In Southern California, shortly after the Mexican–American War, a Scottish-Native American orphan girl, Ramona, is raised by Señora Gonzaga Moreno, the sister of Ramona's deceased foster mother. Ramona is referred to as illegitimate in some summaries of the novel, but chapter 3 of the novel says that Ramona's parents were married by a priest in the San Gabriel Mission. Señora Moreno has raised Ramona as part of the family, giving her every luxury. Ramona's foster mother had requested this as her dying wish. Because Ramona has partial Native American heritage, Moreno reserves her love for her only child, Felipe Moreno, whom she adores. Señora Moreno identifies as Mexican of pure Spanish ancestry. She hates Americans since the United States annexation of California following its victory in the war. They have disputed her claim to her lands, and have divided her huge rancho.
Señora Moreno delays the sheep shearing, a major event on the rancho, awaiting the arrival of a group of Native Americans from Temecula, whom she always hires for that work. The head of the Native American sheep shearers is Alessandro, son of Pablo Assís, chief of the tribe. Alessandro is portrayed as tall, wise, honest, and piously Catholic. Señora Moreno also awaits a priest, Father Salvierderra, from Santa Barbara. He will hear confessions of the workers and celebrate mass with them in her chapel after the shearing, before they return to Temecula.
Alessandro quickly falls in love with Ramona and agrees to stay on at the Rancho. In time, Ramona also falls in love with Alessandro. Señora Moreno opposes the marriage, as she does not want Ramona to marry a Native American. Realizing that Señora Moreno has never loved her, Ramona elopes with Alessandro.
The rest of the novel charts the two lovers' troubles. They have a daughter, and travel around Southern California trying to find a place to settle. In the aftermath of war, Alessandro's tribe is driven off their land, marking a new wave of European-American settlement in California from the United States. They endure misery and hardship, for the Americans who buy their land also demand their houses and their farm tools. Greedy Americans drive them off several homesteads, and they cannot find a permanent community that is not threatened by encroachment of American settlers. They finally move into the San Bernardino Mountains.
Alessandro slowly loses his mind, due to the constant humiliation. He loves Ramona fiercely, and regrets having taken her away from relative comfort with Moreno. Their daughter, whose Native American name means "Eyes of the Sky", dies because a white doctor would not go to their homestead to treat her. They have another daughter, whom they name Ramona, but Alessandro still suffers. One day he rides off with the horse of an American, who follows him and shoots him, although he knew that Alessandro was mentally unbalanced.
After being away from the Moreno ranch for two years, the young widow is found by Felipe Moreno. He brings her and her daughter Ramona back to his mother's estate. Felipe has always loved the senior Ramona and finds her more beautiful than ever. Although Ramona still loves the late Alessandro, she agrees to marry Felipe. (His mother has died, so he is free to marry his choice.) They have several children together. Their favorite is Ramona, daughter of Alessandro.
