Set in the late 1950s outside a small town of Fort Dupree, South Dakota, 15-year-old Holly Sargis (Sissy Spacek), is a teenage girl living with her sign painter father (Warren Oates), although their relationship has been strained since her mother died of pneumonia some years earlier. One day Holly meets the 25-year-old garbage collector Kit Carruthers (Martin Sheen). Kit is a young, troubled greaser, who resembles James Dean, an actor Holly admires due to her reading pop music and movie magazines. Kit charms Holly, and she slowly falls in love with him. Holly's narration, describing her adventures with Kit in romantic clichés, is juxtaposed with the gradual revelations of Kit's increasingly antisocial and violent behavior.
Holly's stern father disapproves of Holly and Kit's relationship, and shoots her dog in cold blood as a punishment for spending time with him. Kit then comes to Holly's house and, after hearing what Holly's father did, shoots her abusive father dead with a pistol. The couple fakes suicide by burning down the house and go on the run together, making their way towards the badlands of Montana.
Kit and Holly build a tree house in a remote area and live there happily for a few weeks, fishing and stealing chickens for food, but are eventually discovered by bounty hunters. Kit shoots the three bounty hunters dead, and the couple flees again. They next seek shelter with Kit's friend Cato (Ramon Bieri), but when Cato attempts to deceive them and go for help, Kit shoots him; he also shoots a teenage couple who arrive to visit Cato shortly thereafter.
An interstate APB is now listed across the USA Midwest as Kit and Holly are hunted by law enforcement. They stop at a rich man's mansion and take supplies, clothing, and his Cadillac, but spare the lives of the man and his housemaid.
By this time, as the two fugitives drive across the so-called "badlands" of Montana, Holly has tired of Kit and no longer pays attention to him, preferring to spend her time as she narrates: "spelling out entire sentences on the off of my mouth". They continue to drive on hoping to get to Canada where Kit tells Holly about wanting to join the Mounties.
When they stop for at an oil rig, a police helicopter swoops toward them from above. Kit kills a policeman in the hovering helicopter and rides off in the Cadillac. Holly, who refuses to go with him anymore, turns herself in. A sheriff and his deputy chase Kit at high speeds across the dusty roads. Kit gets away. Kit then stops his car, makes a stone monument of himself and on that spot allows himself to be captured. The deputy tells the sheriff, "He's no bigger then I am" about the now-legendary prisoner.
At a local military base where Kit is now confined, he is regarded as a celebrity by soldiers, policemen and reporters. It is here that Kit is reunited with Holly who is also in custody. He tells her, "it's too bad about your dad. We're going to have to sit down and talk about that sometime."
In the final scene, Kit and Holly are flown away on a military plane to stand trial for the murders and robberies. A text at the end states that Kit was tried, convicted and executed the following year for his crimes, while Holly (being a minor) only received probation and later married the son of the lawyer who defended her.