In San Francisco during the 1930's, a boy, Will, makes his way through a busy carnival near the under-construction Golden Gate Bridge. The boy dressed in a costume similar to that of the Lone Ranger, walks past the carnival barkers and the concession stands to the Wild West Tent. He pays for entry, and inside, sees stuffed buffaloes, cowboy mannequins, and walks up to a wax sculpture of an old Indian. As he gets closer to the wax figure, the Indian's eyes move. The very old and mentally unstable Indian introduces himself as Tonto (Johnny Depp). The boy, Will, is a fan of the Lone Ranger and recognizes the name. The boy wonders how Tonto came to be a mannequin in a traveling circus. Tonto starts to tell him the story.
Tonto sits astride a horse on a high bluff looking over the western desert. His masked partner, The Lone Ranger (Armie Hammer), gallops up along-side him. He declares that it's time, and they ride into town on their horses. They take over the town bank, order all of its occupants to put their hands in the air, and they proceed to carry out a heist. Back in 1930's San Francisco, Will can't believe what he's hearing, because the Lone Ranger was a hero, not a bank robber.
To explain the circumstances that led to this episode, Tonto goes back a little bit further in time.
1869 - Colby, Texas
Colby, Texas is a rest stop on the transcontinental railroad, where construction is underway at a rapid rate, overseen by rail magnate Latham Cole (Tom Wilkinson). A train is approaching Colby. In one car, Tonto sits shackled, next to the notorious outlaw Butch Cavendish (William Fichtner). Cavendish will be hanged at the next stop, and the federal Marshals are along to make certain the execution takes place. A few cars back, John Reid, the young, college-educated prosecutor, sits in a train car full of protestant missionaries who are singing church hymns. When one of the missionaries asks John if he's a God-fearing man, John responds that he is a law-fearing man. In the prisoner car, Tonto watches Butch peel a wood plank out of the train car's floor, revealing a gun hidden in a compartment beneath the plank. Butch hides the gun, and asks the Marshals if he can get up to urinate. They unchain him and lead him to a chamber pot in the corner of the car. With Butch's back turned while urinating, Tonto gestures to the lawmen that "Butch has a gun". The Marshals take note, but Butch shoots both of them before they can draw their weapons.
At the train station, a quintet of Texas Rangers, headed-up by John's brother Dan Reid, waits for Butch. Elsewhere, Dan's wife Rebecca and son Danny are shopping in the town's commercial stalls (there is a correlation to the set up early in the movie of the Carnival midway stalls). A man named Cole happens upon the pair and flirts with Rebecca, who does not return Cole's attentions.
Butch's outlaw gang catches up with the train, boards it, and robs its occupants, killing the engineers before locking the train at full speed. John, overhearing gunshots and footsteps above, gets up to investigate. He breaks into the prisoner car where he finds Tonto and Butch about to kill one another. John disarms them both, announces himself as the district attorney, and forces them to surrender. Suddenly the train car's doors slide open, revealing Butch's gang waiting for him. They chain up Tonto and John, free Butch, and take off while the train rumbles out of control past the train station at full steam. Dan and his posse saddle up and chase after the train. Tonto manages to separate his chains from the train car, and when he realizes that he and John are chained together, takes John with him to the front of the train, taking out a pair of Butch's gang members. They get to the steam engine, where they find Dan, and attempt to stop the train. All three realize that the train can't be stopped, and separate the passenger cars from the steam engine. The steam engine derails at the end of the track, nearly killing Tonto and John in the process. Unchained during the wreck, Tonto begins to walk away, only to be stopped by John, who latches himself around Tonto's leg. Dan catches them both, and Tonto is presumed to be a criminal, arrested and taken to the town jail.
John and Dan must track down and arrest Butch. Dan wants to find him and kill him, but John insists that Butch must be captured alive and tried in a court of law. Dan kisses Rebecca goodbye, deputizes John, says goodbye to his son. The posse of John and the other Texas Rangers rides off in search of Butch.
During the hunt, they all observe an all-white horse standing on a bluff. Dan explains that the Comanche Indians believe the white horse is a spirit animal, able to cross over from the living world to the dead one. When John asks where Dan learned about native customs, Dan reveals that he's spent the last several years working with the Comanche Indians, and has an appreciation for their culture, even wearing their jewelry.
The posse loses track of Butch's trail at a small canyon, and with no other choice, gallops into it. Ranger Collins disappears and suddenly, the remaining posse is ambushed by Butch's gang. Dan's men are shot down one by one, until John and Dan are left. A bullet kills John's horse, and it collapses, landing on John's leg. Dan tries to save John but is shot multiple times. John frees himself from the horse and runs over to Dan, but is shot in the chest. John falls to the ground and he passes out. Butch and his gang reveal themselves around Dan and John's bodies. Dan, still alive, swears at Butch, who takes a knife, cuts out Dan's heart, and eats it in front of him. John, drifting in and out of consciousness, watches in horror before passing out. Butch orders them all to move out, and they escape back to their hideout.
High above the canyon, Tonto, having escaped from his prison cell, sees the result of the massacre. He sneaks down to the canyon floor and gathers the seven bodies. He digs graves for each, including John, and as he goes through their pockets for valuables, John awakens. Tonto knocks John out with a rock to the head, and pretends that John is dead. As Tonto buries the other Rangers' bodies, the white horse trots over and stands over John's grave. Tonto instantly recognizes this as a sign from the great beyond that John is meant to live another day. Tonto tries to convince the horse that Dan is the warrior but concedes and takes John's body. Tonto slings John over the back of the white horse and the two men & horse head out of the canyon. As John sleeps, Tonto melts down the silver Texas Ranger badges to create a silver bullet.
Tonto paints John's face, steals his boots, and sets him on a wooden platform high above the valley floor. John awakes and nearly steps off of the platform. He carefully makes his way off the platform, and Tonto explains that the powerful forces beyond them both have chosen John to be a spirit walker -- a man who cannot be killed in battle. He explains that Butch Cavendish is a wendigo -- a man possessed by a demon with an insatiable appetite for human flesh. Tonto had been tracking Butch for a long time, and managed to smuggle himself onto the train, and was about to kill him when John intervened. John insists on tracking Butch down and bringing him to justice alive. Tonto fashions a leather mask out of Dan's vest; its eyeholes created by a pair of bullets. He tells John to wear the mask and become a symbol that Butch's men will fear.
The pair ride into town to Red's Brothel, owned and operated by Red Harrington, a former ballerina who lost her right leg to the cannibal Butch Cavendish. Red's new right leg is an ivory prosthetic, with a rifle hidden inside. A local lawman notices that Tonto is in a club which doesn't allow Indians. He runs to get help. Red relates that Butch's men were there recently and paid for their visit with a giant silver nugget. The nugget is worthless but if she could get it to San Francisco, she could probably get a nice return off the ore.
Their conversation is cut short by gunfire within the club because the lawman has returned, this time with an angry mob armed with torches and pitchforks, all hell bent upon killing Tonto. Tonto and John escape. John asks why they wanted to kill Tonto and Tonto explains that the white people are angry at the Comanche Indian tribe because the Comanches have been burning and pillaging white settlements over recent weeks. John, realizing that Dan's wife and son live in the outskirts, heads out to save them.
At that moment Rebecca and Danny are at their home in the desert, doing chores when a silence settles. Flaming arrows set the house on fire. They peer out and watch as members of Butch's gang, wearing headdresses and face paint to pass themselves off as Comanche Indians, kill Rebecca's servants. John and Tonto arrive to find the homestead engulfed in flame and smoke, with Rebecca and Danny nowhere to be found. They hear a woman's screaming in the barn. Inside they find one of Butch's men, trying to strip and rape Rebecca's maid. John and Tonto realize that Butch is behind all the recent raids. Butch's men escape and set the barn on fire, with Tonto and John inside. The entire barn is consumed by fire and with no obvious means of exit, John and Tonto are ready to die, when they hear hooves clicking on the barn roof. They look up to see the white horse, on the roof with a rope in its mouth. The horse pulls them out of the fire, and leaps from the roof and escapes.
Butch's gang now believe that the masked man, a lone ranger, is the ghost of Dan Reid. Butch's only surviving man escapes back to Butch's hideout. Rebecca and Danny are there, along with the traitorous Collins, and Butch. Butch, now fearing that Dan's ghost is after him because of Rebecca and Danny, orders Collins to shoot the hostages. Collins takes them out of the camp, and is about to shoot them when he tells them to run and fires his gun into the air three times, but is then is shot dead.
Tonto and John, who are looking for Butch's hideout, steal one of Butch's horses and follow it into Indian country, with the understanding that the horse will know its way home. They follow it for hours until the horse stops in its tracks and drops dead. John and Tonto, uncertain as to what killed it -- exhaustion probably -- run to its body and find, buried beneath it, railroad tracks. There can't be a train line running through Indian country; it would violate the treaty that the Comanches have had with the US government. Tonto and John, now without a lead to Butch's hideout, bicker.
Suddenly, a feathered arrow comes soaring out of nowhere and lands in John's chest. He screams and passes out. John awakens in a tepee, as Tonto painfully pulls the arrow out of him. The Comanches have shot John. The news of the fake Comanche raids on white settlements has angered both sides. John tries to explain the true order of events to the Comanche elders, according to Tonto's customs, but his pleas fall on deaf ears. They explain to John that Tonto is no longer a true Comanche.
As a young child Tonto lived in a Comanche settlement similar to their own. One day, while hunting, Tonto came across a pair of young dehydrated white settlers. Tonto slung the two over the back of his horse and led them to his camp and treated them back to health. When they were able, Tonto showed them the nearby Comanche river which contained abundant amounts of silver. In exchange for showing them the silver, Tonto was given a cheap pocket watch. The men filled their bags with silver nuggets and, not wanting anyone else to know the location of the silver, killed Tonto's tribe, leaving Tonto as the sole survivor. They even killed Tonto's crow. On that day Tonto went crazy. He made it his mission to find the men who killed his people, and constantly wears the crow and pocket watch as a reminder of their betrayal.
The Comanches bury John and Tonto in dirt, up to their necks, and leave them to bake in the sun while they go to war. The pair of them are soon attacked by scorpions, but the white horse arrives, eats the scorpions and saves them both.
John and Tonto are now convinced that Butch is after the silver deposit Tonto spoke of. Tonto shows John the way and the two eventually find themselves at a silver mine, supervised by Butch and worked by hundreds of Chinese immigrants. Many of the men are afraid to go into the mine, citing spooky native spirits who live inside. Butch kills the fearful Chinese workers and sends in a few of his gang members to investigate their claims.
Inside the mine, the men are ambushed, knocked out by John and Tonto, and pushed out in a mine car in response. Butch and his men open fire on the mine car, with enough bullets to kill anyone who might be hiding inside. They discover, hidden in the car, a lit bushel of dynamite. The cart explodes, wounding Butch, and killing his men. John and Tonto step out of the mine, and surround Butch.
Butch, at first, believes that John is the ghost of his brother, Dan, but soon realizes that "the Lone Ranger" is just the lawyer from town. He laughs. Tonto asks John to kill Butch, and forget his moral obligations. John refuses and finding no way to calm Tonto down, knocks him out with a shovel. He ties Butch's hands to the back of his horse and leads him, as a prisoner, back to town, to face justice.
Rebecca awakens on Latham Cole's train car. It was Cole who saved them both from Butch's gang and shot Collins. Cole ushers her into the dining car, where dinner awaits them both. Rebecca is woozy. She has always been suspicious of Cole's come-ons, and his advances toward Danny. U.S. Army Captain Jay Fuller knocks on the train car door. He and his cavalry unit have been assigned to defeat the Comanche.
John arrives, dragging an exhausted Butch behind his horse. Rebecca and Danny, having heard rumors that it might be Dan, wish to run out and meet him. Cole tells one of his men to take the two into the pantry and hold them at gunpoint. Outside Cole takes custody of Butch and gives him a few good kicks and punches for the cheering crowd, tells his men to put Butch in another car. John is welcomed into the dining car, digs into dinner and begins to notice peculiar items around the table: Rebecca's scarf and a child's toy. He realizes that Rebecca and Danny are on the train, and that Cole is their captor and also realizes that Cole and Butch were the brothers from Tonto's tale. They killed Tonto's tribe for their silver, and have returned to pillage the land and get away.
Cole draws a gun on John, but John is too fast and holds Cole at gunpoint, walking him into the neighboring car where he finds Butch relaxing. Guns are drawn by John, Cole, and Danny, who had wrestled a gun away from one of Cole's men. Cole tells Danny that John killed his father, but his lie is transparent. Captain Fuller walks into the commotion, and is convinced by Cole that John is the bad guy.
John is arrested and taken to another car. Cole takes his train back to the silver mine. There, Butch shows him and Captain Fuller three massive covered train cars overflowing with silver. John is blindfolded and placed in front of a firing squad, at the command of Captain Fuller. A single migrant (Tonto) saunters out of the mine, holding a cage with a dead bird inside. "Gas!" shouts the train conductor. The conductor reverses the train, and pushes a train car between John and firing squad, saving him. He saves John, just as a volley of arrows comes streaking in from the mountain-side. The real Comanches are attacking the miners.
Captain Fuller orders the cavalry to shoot the Comanches with a machine gun. During the fight, John and Tonto manage to escape into the mine. Butch chases after them, and throws lit dynamite after them. John and Tonto narrowly avoid being blown up by diving into an underground lake. They wash up on the shore. Cole orders Butch and his men to load his train with the silver cars. The east and west train tracks will soon be united at Promontory Point, and as soon as they are, he'll be able to take the silver to San Francisco, and sell it for a massive fortune.
Back in 1930's San Francisco, Tonto tells the boy Will why they robbed the bank: to steal Cole's private stash of TNT and nitroglycerin. They take the stolen explosives, and use them to blow up the bridge a few miles from Promontory Point. They return to Promontory Point where a celebration is being held for the uniting of the two tracks. Cole watches, enviously, as the railroad's President and CEO Habberman gets up on stage and cuts the ribbon. The crowd cheers, the band plays, and Cole invites the railroad board members to have a private meeting on his train.
Inside, Cole attempts a takeover of the railroad. He tells all the railroad board members them all that he's about to take a train with $65,000,000 worth of silver to San Francisco, and using that money he'll buy the railroad, which will enable him to control the country. Habberman laughs off Cole's plans, calling them ludicrous, and is shot in the leg.
Tonto sneaks onto the other train, commandeers the engine, and puts it in reverse, in the direction of the destroyed bridge. Captain Fuller orders his men to fire upon Tonto with the machine gun, but Tonto is saved by John who appears, on horseback, riding over the tops of buildings. Cole orders Butch and his men to start the second train and to go after Tonto.
Cole, Butch, and Fuller chase after Tonto with John riding his horse across the top of the train. Rebecca and Danny are held captive inside the second train. Tonto manages to hit a switch-track, forcing the second train onto a separate route. Multiple cars are uncoupled from their engines, and ultimately Butch and Fuller end up on two separate cars which collide, killing them both. Cole, having moved to the train being piloted by Tonto, prepares to kill him when John, using his melted-down silver bullet, shoots the gun out of Cole's hand. Tonto escapes the train, now being piloted by Cole, who has his rail cars full of silver behind him. Cole, convinced that he has a clean escape to San Francisco, arrives at the destroyed bridge. Cole's train, along with the silver, flies off the tracks, into the water below. Cole is subsequently buried by his silver, and dies. The train, which Tonto and John were riding, along with dozens of innocent bystanders, comes to a stop before plunging off the destroyed bridge.
At Promontory Point, Habberman and the crowd applaud John for saving the day and killing Cole. Habberman tries to convince John to give up his outlaw ways, and reveal his true identity to the people. John refuses and takes off on his horse eventually meeting Tonto sitting on a bluff, overlooking the valley beneath them. John tells Tonto that he's decided to name the white horse "Silver". Tonto likes the name but tells John, very seriously, to never repeat the phrase "Hi-Ho! Silver Away!"
In 1930's San Francisco, the old Tonto is preparing to go home after a long day's work. He puts on a jacket and a bowler hat, and trades the kid a silver bullet before heading off into the night.