Heather and her younger brother Picket are adolescent rabbits who have lived a sheltered life in Nick Hollow with their parents and younger brother, Jacks. Their father likes to tell them stories. One night, he tells them a true story about a great rabbit king named Jupiter, who brought peace and unity to the many rabbit warrens.
A great fighter, he also protected them from fierce wolves and birds. In the morning, Heather is surprised that someone is already visiting them. She overhears the strange female rabbit tell her parents about someone named Morbin, who has sent wolves out to hunt for the Green Ember. The young rabbits are made to pick berries so their parents and the stranger can talk privately.
Once they return home, they find their house in the elm tree has been lit on fire. Wolves surround it. Heather drags Picket to safety as several of the wolves turn to hunt them. Heather hides Picket inside an underground mound, but she cannot fit within the tunnel. As their leader pounces on her, she is pushed out of the wolf’s way and knocked unconscious by a gray rabbit. Picket watches as the gray rabbit and another white rabbit fight the wolves, sending them fleeing in shame.
The gray rabbit introduces himself as the children’s Uncle Wilfred. Picket and the white rabbit carry Heather into the tunnels. Uncle Wilfred cannot fit, but will meet up with them later. Picket does not like the white rabbit’s condescending attitude. He learns the rabbit’s name is Smalls, and he is Wilfred’s adopted son. As Picket and Smalls navigate the labyrinth of tunnels underground, trying to find a way out, they hear the sound of their enemies searching for them. They finally manage to find an underground river, and a boat, and break through a rock wall to escape the creatures. They meet up with their uncle and set off to find safety.
Uncle Wilfred and Smalls guide their boat toward Decker’s Landing, a town named for an old friend of theirs. They hope to find refuge as they decide what to do with the children. The town, however, is on fire and surrounded by wolves. The rabbits leave the boat and run toward Cloud Mountain, a refuge for rabbits. Picket trips on a rock and hurts his foot, but Smalls carries him to safety. Instead of being grateful, Picket resents the heroic rabbit’s abilities and assurance. When they stop to rest, Uncle Wilfred warns Picket that his attitude is a dangerous one. Not only did it cause him to get distracted and fracture his foot, but now his injury may put the rest of them in danger. Uncle Wilfred carries Picket up Cloud Mountain on his back. After a cool welcome from the warren’s guards, Lord Rake, the warren’s leader, welcomes the weary travelers.
Although given food and rooms in the warren, Heather senses that the other rabbits are wary of them. There is a great deal of animosity toward Smalls and Uncle Wilfred in particular. Lord Rake asks his foster daughter, Emma, to befriend Heather and Picket and help them acclimate to life in the warren.
Although Emma is friendly, she cannot answer many of their questions until they have passed an initiation, as the warren has suffered many betrayals in recent days. Picket feels useless, becoming more depressed and angry as the days go by. A black rabbit, which everyone seems to avoid, lurks in the corner of the dining hall and intrigues Picket.
Emma takes Heather and Picket on a tour of the warren. All the rabbits have jobs that help support the community. Although Heather has always been a gifted storyteller, she is scared to compare her talents to the warren’s story guild.
Emma warns them of rumors that Cloud Mountain will soon be under attack. Most of the residents that live within the mountain once lived in the Great Wood, an idyllic community under King Jupiter’s reign. They refer to themselves as the heralds of the Mended Woods, hoping to one day return to the Great Woods and restore it to its former glory.
Emma introduces them to Kyle, a rabbit about their age, who is a bit of a rogue. He tells them of a land of enchantment called Terralain. He also claims to know where King Jupiter’s heir is hiding. Supposedly, the heir is rumored to be sick, and in his feverish state, often prophesizes about the future.
Picket sees the mysterious black rabbit tying knots and hoisting a contraption into a tree. Emma explains that he is Helmer the Black, rumored to be a disgraced knight of King Jupiter’s army. Picket is fascinated to watch as Helmer battles wooden birds and axes that he has set up in the tree. Helmer appears to have set too difficult a test for himself, but Uncle Wilfred, Smalls and Lord Rake arrive in time to save his life. The following day, Picket asks Helmer to take him on as his apprentice.
Although reluctant at first, Helmer eventually agrees. The training is difficult, but Picket soon proves himself a gifted soldier. Kyle tells Heather that the other warrens, known as the secret citadels, are in an uproar. They want to attack their enemies and try to regain their former glory. Others have already joined with their enemies to try and gain power. Even one of King Jupiter’s sons has joined with his father’s murderer.
Lord Rake finally initiates Heather and Picket into the warren, but to do so, he must tell them the truth about their family. One of their uncles, Garten Longtreader, was a trusted ambassador of King Jupiter. But Garten betrayed the king, setting a trap, which allowed him to be killed by a bird named Morbin Blackhawk.
Heather is horrified to learn of her uncle’s betrayal. It is the reason many rabbits still do not trust Wilford or her and Picket. They feel the whole family was responsible for the death of the king.
Kyle approaches Heather. He appears distressed and distracted. He asks her if she thinks someone can be trusted, even if they have done bad things in the past. Before she can answer, another rabbit verbally accuses her of being a traitor.
Kyle comes to her rescue. He warns her he has heard grim rumors about what is going on outside the warren. Later, Smalls asks her if she thinks Kyle can be trusted. She considers her answer carefully before telling him yes, but they are interrupted before she can also warn him that Smalls should be cautious with what information he entrusts to Kyle.
Smalls tells Heather he is going to try to find his mother and rescue her from a place called Exile Glen. He asks her to tell Uncle Wilfred where he is going. Heather runs after him to warn him about Kyle. Instead, she accidently learns that Smalls is King Jupiter’s heir.
Wolves attack Cloud Mountain. Rabbits flee in terror. Heather tells Picket they must get to Smalls’ quarters, as she believes the Green Ember, the symbol of King Jupiter’s heir, may be hidden there. They find Kyle pilfering the room. He has not been able to find the Green Ember.
Kyle admits he betrayed Smalls to Morbin Blackhawk. Picket takes off to save the future king while Heather runs to find Lord Rake and Uncle Wilfred so they can send reinforcements to help protect Smalls. Picket arrives too late. Smalls is bound and kneeling before the snarling wolf, Redeye Garlackson.
Picket is shocked when his uncle, Garten Longtreader, approaches and orders Smalls’ death. Garten removes the Green Ember from Smalls’ satchel. Picket speeds toward the scene in an effort to save Smalls. He manages to kill Garlackson and cut the ropes binding Smalls. Garten drops the Green Ember and flees. Smalls hides the stone in his satchel again then turns to fight his enemies side by side with Picket.
Fortunately, because of Heather’s speedy message, reinforcements arrive in time to save Jupiter’s heir. Picket fights valiantly by the prince’s side until the danger is past and their foes retreat. Prince Jupiter Smalls publically acknowledges the debt he owes to both Uncle Wilfred and Picket, erasing the traitor label associated with the name Longtreader.
The rabbits return to Cloud Mountain and prepare for the war they know will soon come. Heather finally summons her courage and tells her tale to the story guild. It is copied down and passed to rabbits far and near. The last page speaks of the hope of a New World, but also of hard trials that will come first. Picket continues his training under Helmer until news arrives that his parents and little brother may still be alive. He takes up his sword to save them.