As told by a narrator (voice of MATT DAMON) who voices the thoughts of the titular horse, we're taken back to the American Old West where Manifest Destiny is sending white men into regions previously inhabited only by Indians and animals. There, a foal is born that then grows up to be Spirit, the stallion leader of his herd.
He and the other horses live a free life, but that's about to change when he goes to investigate what turns out to be an overnight camp of some "two legged" humans. They quickly capture and return him to their fort where the stern Colonel (voice of JAMES CROMWELL) wants the stallion broken. When no one there can manage to do that, the Colonel orders that the horse be left out in the hot sun with no food or water for three days.
Eventually joined by Little Creek (voice of DANIEL STUDI), a captured Lakota Indian, Spirit finally seems broken, but then throws the Colonel who subsequently prepares to shoot the horse. Little Creek manages to free himself and rescue the horse, however, and the two race off to his tribal lands where Spirit meets a headstrong mare, Rain.
Spirit eventually learns that not all humans are bad, but does have more perilous encounters with various people who want to capture and use him as slave labor. From that point on, and with the aid of Little Creek, the horse tries to regain his freedom and return to his herd.