Not long after the end of the Civil War, a young family settles in a community called Salt Licks, Texas. Jim Coates (Fess Parker), his wife Katie (Dorothy McGuire) and two sons, Travis (Tommy Kirk) and Arliss (Kevin Corcoran), have a pretty good start on things, but are lacking money, except some minor amounts of useless Confederate money. The same is true for most of the other families in the area. Jim joins forces with other ranchers and they embark on a cattle drive to Kansas, to trail and sell their cattle and acquire money to buy things they need.
Jim tells Travis he's depending on him to help his mother and look after the ranch while he's gone for the next 3-4 months. He promises to bring Travis the horse he wants when he returns from Kansas.
Travis is plowing the cornfield with Jumper the mule when a big yellow dog barrels through the field while chasing a rabbit. That spooks the mule, which bolts and takes off running, dragging Travis behind. Travis escapes from the plow harness, but the mule continues running, the plow knocking down a long section of fence in the process. Travis is furious with the dog, throwing rocks and threatening to shoot it if it comes around again.
The younger boy, Arliss, regularly collects small animals and puts them in his pants pockets, much to the dismay of his mother. When Arliss hears about what happened with the strange yellow dog, he immediately wants to find and keep it. The next morning, the dog is lying outside the front door, and when Travis goes for a stick to use in chasing the dog off, Arliss is upset and is ready to fight his older brother in order to protect the dog. Arliss immediately adopts the dog and his mother approves, encouraging Travis to reconsider his feelings about having the dog around.
Travis really wants nothing to do with the dog, but his feelings begin to change after he brings home a deer he shot and hangs the meat on the front porch, warning the yellow dog not to touch it or he'd pay the consequences. Travis then purposely lowers the meat so it will be easily within reach of the dog. The next morning, Travis grabs his gun in anticipation and goes out onto the porch, expecting the meat to be gone and thus providing a reason for him to shoot the dog. However, the meat is untouched and the yellow dog is lying quietly nearby. The makes a great impression on Travis.
Arliss has taken to calling the dog "Yeller." He rides Yeller like a small horse, takes him fishing (Yeller catches a catfish), and they go swimming together in the family's spring water pool. One day, Arliss is breaking off small pieces of bread and tossing them to a small black bear cub. When the cub comes closer, Arliss jumps on it and tries to catch it. The cub cries out and within moments, the mother bear comes running, heading right for Arliss. Yeller flies into the picture and attacks the mother bear, keeping her at bay until Mrs. Coates rescues Arliss. That event confirms the complete acceptance and respect for Yeller by Travis.
Bud Searcy (Jeff York) and his daughter Elizabeth (Beverly Washburn) come by to check up on the Coates family. Bud is a lazy, big-mouthed sort who was left behind by the men of the community to look after the families while they were gone to Kansas. Bud's most redeeming points are his ability to show up around meal-time, get his daughter to do any work that needs done, and to tell exaggerated tales about his experiences and those of his family members. Elizabeth, who is about Travis age, confides in Travis that she has seen Yeller stealing eggs and cornbread from members of the community. She won't tell her father or anyone else however, because she knows Yeller is the father of the pups her dog is expecting and she doesn't think it would be nice to get the father of her dog's pups in trouble.
Travis determines that one way to keep Yeller from roaming and getting in further trouble, is to put him on guard duty in the cornfield, where raccoons have been eating the corn. Yeller does a good job of chasing off the coons.
The Coate's lone milk cow, Red, goes off into the woods to birth her calf and Travis takes Yeller to go find them. The cow, being protective of her calf, attacks Travis and Yeller intervenes and actually knocks the cow down twice before she decides to stop chasing Travis. Travis carries the calf home while Yeller herds Red back.
Red is still very upset, having been tied to a fence without her calf nearby. Travis must attempt to milk her, but she kicks at him. So, he calls to Yeller to come help. Yeller slowly walks towards Red, stopping a few feet away and just stares at her. She immediately calms down and presents no further problem. Mrs. Coates is amazed.
Burn Sanderson, a rancher passing through from San Antonio, comes by the house and announces that he lost a big 'ol yellow dog recently. He said the dog was an excellent cattle dog and he hoped to get him back. Mrs. Coates tells Travis to go get Yeller. Travis doesn't want to, but he does as told. As Sanderson puts a rope around Yeller's neck and begins to ride away, Arliss picks up some rocks and throws them at Sanderson. That spooks Sanderson's horse and it bucks him off. Sanderson is a wise and kind person and he immediately realizes the impact Yeller has made on this family in the short time he's been there. He challenges Arliss to approach him, as though to deal with the matter man-to-man. He then offers to trade the yellow dog for the horned frog that Arliss has in his pocket, plus a "woman-cooked meal." Arliss agrees and his mother helps with the meal part of the deal.
Before he leaves, Sanderson releases the horned frog and confides in Travis that there are cases of hydrophobia (rabies) showing up in the area. He advises him not to delay in quickly dispatching any unusually aggressive animals he may come across.
Travis decides to try a method of catching some wild pigs that Mr. Searcy had told him about. It involves climbing into a low hanging branch, having your dog herd the pigs under the branch, lowering a rope noose to catch one pig at a time, pulling it up, notching it's ear (in effect, branding it), then continuing with the rest of the pigs. Travis and Yeller collaborate well and he successfully marks one small pig, but his second attempt is a larger pig and it pulls him out of the tree. A boar with sharp tusks then attacks Travis, cutting his leg. Yeller saves him, but in the process, Yeller is severely injured. Travis uses a neckerchief on his leg, then wraps his shirt around Yeller's torso wound and helps him into a small cave for protection and runs for home. Mrs. Coates returns with Travis, Arliss, and Jumper to see about Yeller. She sends Arliss off to catch a green lizard for her (to keep him busy), while she uses one of Jumper's tail hairs to sew up Yeller's wound. They then use a travois to haul Yeller home to recover.
While Travis and Yeller are recovering, Mr. Searcy and Elizabeth come by. Elizabeth brings with her a small yellow puppy, one of Yeller's pups, and offers it to Travis. Travis says he's not interested and tells her to give it to Arliss. Elizabeth is very hurt and deposits the puppy in Arliss' lap as she rushes out, crying. Arliss is thrilled with the pup.
Some days later, the hydrophobia makes its presence known in the form of the cow, Red, becoming infected and going crazy. Travis must shoot the cow, and while his mother and Elizabeth are putting wood on a large fire to burn the carcass, a wolf attacks them. Yeller is right on the spot and engages the wolf. Travis runs out with his rifle and when he has a clear shot, he shoots the wolf dead. Yeller has some bite marks and Mrs. Coates tells Travis that he will need to shoot Yeller too, because he's no doubt infected, as the wolf had been acting very strangely when it attacked. Travis convinces his mother to let him put Yeller in a pen and observe him.
After nearly four weeks of being penned, Yeller does in fact turn mean and snarls and snaps, first at Travis then Arliss. Travis acknowledges the inevitable and goes to get his gun. After considerable difficulty, Travis points the gun at Yeller and pulls the trigger. The next day, Mr. Coates returns home, bearing gifts of a new dress and shoes for his wife, an Indian headbonnet and hatchet for Arliss, and a new horse for Travis. Travis and Elizabeth are in the process of burying Yeller. Travis is despondent and doesn't respond as his father hoped he would upon seeing him and the new horse. Mr. Coates fully understands the situation, however, and counsels his son.
Mr. Coates tells Travis that life can sometimes knock a person flat and make them hurt bad. He says that people need to be careful that life's bad events don't overwhelm them and cause all life to seem bad. He explains that along with the bad in life, there's also good, and the good can be found if a person just looks for it. Travis is naturally skeptical, and probably disbelieving, but when he observes his mother getting angry at the little puppy for dragging off a slab of venison to chew on, he immediately recognizes Yeller's character exhibiting itself in the pup, and he smiles in recognition of what his father was talking about.