As Island of the Blue Dolphins opens, Karana and her brother, Ramo see a ship approaching their island. When the ship lands, the chief of their village (also their father), Chowig goes to meet the visitors, along with a number of his warriors. The representative of the strangers is Captain Orlov, a Russian, who has come with a native American tribe known as the Aleuts to hunt otter on the island of the blue dolphins (known to its inhabitants as Ghalas-at). There is disagreement between the two, for the Aleuts had caused trouble on the island some years before. Finally, Chowig and Orlov reach an agreement, and the people of Ghalas-at let the Aleuts hunt otter on their island in return for half of their profits in the form of jewelry and iron spearheads. The Aleuts set up camp at one end of the island, and the Aleuts and the people of Ghalas-at keep close watch over on another, suspicious of being double-crossed. When the Aleuts start getting ready to leave, Chowig and his warriors ask for their payment. The sum is unsatisfactory, however, and the two parties disagree. A fight breaks out. When the battle is done, the Aleuts have escaped, and many of the men of Ghalat-at have been killed, among them Chowig.

A new chief, Kimki, comes to power, and after a dreary and sad winter, he decides his tribe should leave Gahlas-at. He sets off alone to prepare a way for them in a new county he had visited as a boy. He is gone for a long time, but one day a ship with white sails comes to Ghalas-at. It carries a group of white men who say they were sent by Kimki to take the islanders away. The day is stormy, so the villagers need to board the boat quickly before the ship runs aground on the rocks of the island. In the confusion, Ramo forgets his hunting spear. Karana tells him there is no time to go back for it, but once Karana is on the ship, Ramo is nowhere to be found. As the ship pulls away from the island, Karana sees Ramo, with his spear, back on the beach. Though others on the boat try to restrain her, Karana jumps into the water and swims back to the island.

Back on the island, Ramo and Karana work hard to provide for themselves. They gather food and prepare to stay for some time on the island—at least until the ship returns to take them away. Though Ramo is young, he is very confident and tries to do many things on his own. One morning, Karana awakes to find that Ramo is gone. She goes out to look for him, only to find him dead, killed by the wild dogs of the island.

After Ramo is killed, Karana decides to leave her village forever. She burns it and sets up camp on a rock near the headland. She makes tools to defend herself, although the laws of her tribe bar a woman from making weapons. She watches everyday for the ship that will take her away, but it never comes. One day, she takes a canoe and tries to make the journey herself. Though she is able to paddle a great distance, her canoe starts to leak after a few days, and, realizing she cannot reach her destination, she turns back.

Knowing that she could be on Ghalas-at for some time, Karana builds herself a house and some stronger weapons. Once she has finished these necessities, Karana decides it is time to exact her revenge on the wild dogs that killed her brother. She used fire to scare them out of their cave, and strikes down their leader along with several others. The lead dog is strong, however, and is able to escape even with an arrow lodged deeply in his chest. Days later, Karana finds the same dog, barely alive. Instead of killing him, she takes him home and nurses him back to health. The two become fast friends, and the dog, whom Karana calls Rontu even defends her from his former pack mates.

One day, the Aleuts, who had killed so many of Karana's friends and family, return to Ghalas-at. Karana sets up a second house in a cave to hide from them. One day, however, an Aleut girl discovers Karana by her house. Though Karana is wary and suspicious of the girl, whose name is Tutok, the two eventually become close friends. They exchange gifts and talk by the fire (though they do not speak the same language). When the Aleuts have finished hunting, the girl has to go with them, and Karana feels more alone than ever.

Karana continues her work on her house, and becomes more and more comfortable on the island. She makes herself new clothes and befriends a number of other animals, including birds, an otter, and a fox. Years later, when Rontu dies, Karana takes his son from the cave of the wild dogs. She tames the dog, and names him Rontu-Aru.

After her long stay on the Island of the Blue Dolphins, another ship comes to her harbor. Realizing that it is time for her to leave, and missing human contact, Karana gathers her things and, with Rontu-Aru, leaves Ghalas-at.