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The film starts with a brief introduction in the 19th-century American West featuring a bald eagle gliding over the homeland of the mustangs, showing several western US National Parks.


There is then a scene showing the birth of a dun Kiger Mustang, Spirit. Spirit soon grows into a stallion, and assumes the role of leader of the herd, whose duty it is to keep the herd safe, demonstrated when he saves two foals from a mountain lion. Spirit is a courageous leader, but has great curiosity. Spotting a strange light one night not far from his herd, the stallion is unable to control his curiosity and moves towards it. To Spirit's surprise, he finds restrained, docile horses, and two-legs (possibly wranglers) sleeping around a campfire. They wake up, and seeing him as a magnificent specimen, chase and capture him, then drag him to a US cavalry post. During this time, the army is fighting the Indian Wars and taking over the soon-to-be western United States. Frightened and confused, Spirit sees horses used as 'slaves' all around him. There, he encounters "The Colonel". He decides to tame the mustang, refusing to believe the idea of Spirit being too stubborn, but Spirit manages to fight off the brander even when heavily restrained and throws off all who attempt to ride him, impressing the other horses and reigniting their spirit. To punish Spirit, The Colonel orders him to be tied to a post for three days with no food or water.


During this time, a Lakota Native American named Little Creek is also brought into the fort and held captive until he answers questions. Spirit is then broken in by the Colonel, who speaks his idea of how any wild horse can be tamed. Spirit gets a second wind and throws him off. When the Colonel gets frustrated and tries to shoot him, with Little Creek's help, they, along with other horses, escape the post. Little Creek's mare, Rain, meets them along with other Indians who capture Spirit. After returning to the Lakota village, Little Creek tries to tame Spirit with kindness, but Spirit refuses to be ridden. Little Creek ties Spirit and Rain together and, when he tries to leave, she insists on staying, then shows him her world. Spirit begins to warm up to Little Creek and falls in love with the mare. At the end of their time together, Little Creek tries again to ride him, but Spirit is still unwilling. He then decides that Spirit will never be tamed and frees him. As Spirit asks Rain to come with him to his herd, a Cavalry Regiment led by the Colonel ransacks the village. During a vicious battle, Rain is shot by the Colonel, knocking her into the river while Spirit knocks the Colonel off his horse, saving Little Creek's life. Spirit dives into the river to try to rescue Rain, but is unsuccessful and they both plummet over a waterfall. Spirit finds Rain dying from her injuries and stays by her side until scouts capture him. Watching Spirit being pulled away, Little Creek arrives, vowing to free him to satisfy his life-debt and follows the men after tending to Rain. Spirit and other stolen horses are then loaded onto a train and taken to a work site on the Transcontinental Railroad, where they are put to work pulling a steam locomotive. Not understanding, Spirit takes it as another challenge when he realizes that if the track extends along its present course, it will infringe on his homeland. Spirit feigns injuries resulting from exhaustion but breaks free from the sledge and breaks the chains holding the other horses. They escape, and the locomotive falls off its sledge and rolls down the hill chasing Spirit. When they reach the work site where the locomotive demolishes a building as it plows through it, then it crashes into another locomotive parked on the tracks and smashes into it, but because the locomotive is already under steam, its boiler explodes as it's being crushed. After the locomotive explosion, Spirit rushes out of the work site as the spreading flame starts to set it on fire. As it does, it lights a shed aflame which explodes because it was stored with explosives. The explosion causes a forest fire, and Spirit starts to gallop away as fast as he could, but the end of the chain that is wrapped around his neck gets snagged on a fallen tree Little Creek appears in time and saves Spirit from the wildfire. The next morning, the Colonel and his men find Spirit and Little Creek playing with each other. A climactic chase scene ensues on rock passages that lead to the Grand Canyon, where the two again outsmart the soldiers. Eventually, they are trapped by a gorge and forced to summit onto a cliff which faces over the gorge (beyond it is open space). Little Creek gives up, but Spirit manages to gain the bravery to leap off the cliff and onto the open land.


Spirit's move amazes the Colonel; he stops his men from shooting the two. Knowing it's for the best, the Colonel exchanges nods of respect to the two before walking off with the rest of the soldiers. Spirit returns to the rebuilt Lakota village with Little Creek and finds Rain still alive, nursed back to health by the Lakota people. Little Creek decides to name Spirit the "Spirit-Who-Could-Not-Be-Broken" and sets him and Rain free. He also took the feather out of Rain's mane and promises her that she will always be in his heart. Spirit and Rain travel day and night to his homeland. Eventually, the two horses joyfully meet up with Spirit's own herd. The eagle then appears as he flies up into horse-shaped clouds.

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