"The Ransom of Red Chief" begins with Sam, the story's first-person narrator, recounting how he and his partner in crime, Bill, were in Alabama when they had the idea to kidnap a wealthy man's son and hold him for ransom. The men have six hundred dollars and need two thousand more to pull off another scheme in Illinois. In a town called Summit, the men target a mortgage lender named Ebenezer Dorset, kidnapping his ten-year-old son Johnny.
In a rented horse and buggy, the men abduct Johnny from his front yard and take him to their cave hideout on a nearby mountain. The boy isn't afraid of the men. Instead, he plays make-believe with them, pretending to be a Native American warrior named Red Chief who has taken Bill and Sam captive. The boy's hyperactive behavior and incessant questions keep the men awake most of the night, but they do not worry that Johnny will escape because Johnny says he hates being home and going to school.
Johnny wakes the men up at dawn by trying to remove Bill's scalp with a knife. Sam intervenes, and can't go back to sleep because he worries Johnny will try to burn him at the stake, as he has threatened to do while in character as Red Chief. Bill is terrorized by the boy's sadistic commitment to make-believe, and worries that no one would pay two thousand dollars to have a child like him returned.
Sam leaves the cave to get a view of the countryside. He hopes to see the entire town out with pitchforks and scythes, desperately searching for Johnny, but instead sees no commotion. Back at the cave, he finds Bill and Johnny in conflict again. This time, the boy put a hot potato down Bill's back and Bill hit him on the side of the head. Sam calms Bill down while Johnny walks off, unraveling some string and leather from his pocket. As the men discuss their plans for the ransom, Johnny uses his sling to throw a rock at Bill's head. Bill falls into the burning fire and a pan of simmering water. Sam pours cold water on his head for an hour and then threatens Johnny that he will send him home if he doesn't behave and be kinder to Bill.
After composing a ransom letter that asks for only $1,500, Sam leaves Bill and the boy at the cave, walking three miles to Poplar Cove. In the town, he talks to people until he learns that news of the boy's disappearance has spread. He then posts the ransom letter and returns to the cave to discover Bill and the boy are gone. Eventually Bill emerges from the bushes exhausted and explains that he got rid of the boy on the road to Summit. Bill apologizes to Sam, saying he couldn't put up with pretending to be the boy's horse. Meanwhile, Johnny stands eight feet behind Bill, having followed Bill back to the cave.
Sam leaves the cave that night to hide in a tree and wait for a response to the ransom note. A teenage boy rides up on a bike and slips a return note in a box by the tree. Once Sam is confident no police are around, he leaves the tree, collects the note, and returns to the cave. By lantern light, Sam reads the note to Bill. In it, Dorset, the boy's father, suggests that they have set the ransom too high. As a counteroffer, Dorset proposes that the kidnappers pay him $250 to take Johnny back off their hands. Bill convinces Sam that Dorset's offer is generous, considering what a nightmare Johnny has been.
At midnight, the men trick Johnny into going back to Dorset's house with them. Bill and Sam pay Dorset the money. Johnny clings to Bill's leg when he realizes they are leaving him, and Dorset peels him away, saying he can only hold his son for about ten minutes. Sam and Bill run out of town, Bill running much faster despite being less athletic than Sam.
