Douglas Spaulding is a twelve-year-old boy living in Green Town, Illinois. The summer starts with Douglas coming to the realization that he is alive, and he rejoices in the beauty of everything around him. The dandelion wine that he makes with his ten year old brother Tom and his grandfather represents that beauty. At the end of June, July, and August, they press one small bottle for each day of the summer. Douglas is ready to enjoy the magical life of summer, but something is missing. He needs new sneakers. Douglas does not need new sneakers because he wants to look good or because last years pair is out of style. He needs new sneakers because the Royal Crown Cream-Sponge Para Litefoot Tennis Shoes have the magic that he needs to run like the wind and bound through the world. Douglas tells Mr. Sanderson, the shoe salesman, the importance of the sneakers to him and his passion is so great that the old man is transported briefly back to his own childhood, when he wanted to run like gazelles and antelopes. The man is so thrilled by Douglas's speech that he gives him a list of errands to run in exchange for the new shoes. Douglas is now ready to run through the town and its ravine, the gateway to the wilderness, with his pals Charlie Woodman and John Huff.
Douglas decides that this summer he will record the events that occur in two different ways: he will write down all of the rituals that occur every summer, and write down his reflections on those rituals. He has already discovered that adults and children are two different races, and he lets Tom in on his plan to record the summer. The summer is full of events. Leo Auffmann, the town jeweler, decides to invent a Happiness Machine. He fails, but learns from his failure that his family is the only Happiness Machine he will ever need. Douglas is saddened that Leo could not succeed in his endeavor. Grandpa Spaulding points out the beauty of mowing the lawn to Bill Forrester, the newspaperman who is a boarder at Douglas's grandparents' house (next door to his house). Along with their mother, grandmother, and great-grandmother, Douglas and Tom help beat the dust and dirt out of the huge rugs from the house. Tom discovers that old people were never children, and he relays this to Douglas. Douglas is amazed by this but soon finds that old people have tremendous value. Charlie takes John and Douglas to meet Colonel Freeleigh, a very old man whom they call a Time Machine because his stories transport them back to an earlier time. Douglas realizes that old people may not have been children, but they have a past.
Things also begin to change for Douglas. The Green Machine, the electric car driven by Miss Fern and Miss Roberta that all of the children would sometimes ride in, is put away in their garage, never to be driven again. The town trolley, driven by Mr. Tridden, runs for the final time. Buses will replace the trolley. John Huff, Douglas's best friend, informs him that he is moving away, to Milwaukee. Douglas is crushed by John's departure, and he deals with the loss of his friend by getting very angry with him for leaving. Mrs. Elmira Brown accuses Clara Goodwater of using magic to win the election every year at the Honeysuckle Ladies Lodge, and attempts to use a magic spell of her own. This episode ends in comic disaster, and Tom relays it all to Douglas, who is enthralled with the idea of magic. Then Colonel Freeleigh passes away, and Douglas feels a great loss. He realizes that all of the colonel's stories and memories have passed away with him, and as August starts Douglas begins to get down about the summer. However, his grandfather is able to raise his spirits with a bit of dandelion wine.
Soon the image of death begins to haunt Douglas even more. He observes the brief but sweet romance between Bill Forrester and ninety-five-year-old Helen Loomis. Although their ages are poorly matched, they spend hours talking together every day for weeks, and it seems that their minds are perfect for each other. This ends when Miss Loomis dies, and Douglas is left wondering why there are no happy endings. His brother Tom tries to explain that the romance was happy because it was all they could ever have, but Douglas is not satisfied. The Lonely One, an evil prowler who lurks in the night and strangles women, has the town in a state of fright. Lavinia Nebbs and Francine stumble upon the dead body of Elizabeth Ramsell on their way to the movies. Douglas sees the body and runs off. Later that night Miss Nebbs stabs and kills the Lonely One in her house. While Tom convinces Charlie that the man killed could not have been the Lonely One because he did not look like the Lonely One they imagined, Douglas is shocked by how close he was to death. Next his great-grandma dies, and although she tells Douglas that death is not a bad thing, he begins to draw a fateful conclusion. Douglas realizes that he must die. He convinces his brother to help him in a crazy escapade to save the wax Tarot Witch from the penny arcade where she tells people's fortunes. Douglas thinks that she is really Mme. Tarot, imprisoned in wax, and when he frees her she will help him live forever.
Douglas knows that no witch can save him from death, and his coming to terms with the fact that he must die sends him into a terrible fever. No one can help Douglas except Mr. Jonas, the junkman, who gives him two bottles of pure winter air, to be tasted when the summer heat is too great. Mr. Jonas's gift breaks the fever. The summer had become too much for Douglas, but the air helps him see that change is a part of life and restores the magic to the summer. Douglas is able to come to terms with his death. He passes on the gift that Mr. Jonas gave him to his grandmother when she loses her spontaneous talent for cooking. The summer ends with Douglas once again thrilled with the magic of life.