It's 1890 and former cavalry man Frank T. Hopkins (VIGGO MORTENSEN) and his trusty mustang Hidalgo are performers at Buffalo Bill's Wild West Show. Hiding behind that and many a drink, Frank is still reeling from indirectly being responsible for an American Indian massacre at Wounded Knee Creek some eight months earlier.
Yet, Frank's reputation as a champion long-distance horseback racer has garnered the attention of Arabian Sheikh Riyadh (OMAR SHARIF) who's enamored with America's Old West. His emissary, Aziz (ADAM ALEXI-MALLE), informs Frank that the Sheikh wants him to be the first foreigner to participate in the 3,000 mile "Ocean of Fire" race across the Arabian Desert.
It's not long before Frank's halfway around the world where he meets the Sheikh and his highly spirited daughter, Jazira (ZULEIKHA ROBINSON), who isn't happy that being female means her life is already predetermined for her. Then there's Lady Anne Davenport (LOUISE LOMBARD), an aristocrat from a long line of horse breeders who wants to dip into the genetic pool of the purebred Arabian stallions, and Katib (SILAS CARSON), the Sheikh's nephew who wants to get his hands on the family's horse breeding papers.
Frank is informed that most of the racers and their rides won't even come close to reaching the finish line. Nevertheless, he and Hidalgo set out to win. As they slowly make their way toward the finish line, they must not only contend with the harsh terrain and elements, but also the treachery and disdain of the other riders, such as Prince Bin Al Reeh (SAID TAGHMAOUI) -- who look down on the American and his mixed breed horse - as well as various other distractions.