The novel opens with two men, George Milton and Lennie Small, walking to a nearby ranch where harvesting jobs are available. George, the smaller man, leads the way and makes the decisions for Lennie, a mentally handicapped giant. They stop at a stream for the evening, deciding to go to the ranch in the morning. Lennie, who loves to pet anything soft, has a dead mouse in his pocket. George takes the mouse away from Lennie and reminds him of the trouble Lennie got into in the last town they were in — he touched a girl's soft dress. George then reminds Lennie not to speak to anyone in the morning when they get to the ranch and cautions Lennie to return to this place by the river if anything bad happens at the ranch.
When he has to take the dead mouse away from Lennie a second time, George chafes at the hardship of taking care of Lennie. After calming his anger, George relents and promises Lennie they will try to find him a puppy; then he tells Lennie about their dream of having a little farm where they can be their own boss and nobody can tell them what to do, where Lennie will tend their rabbits, and where they will "live off the fatta the lan'." Lennie has heard this story so often he can repeat it by heart. And George emphasizes that this dream and their relationship make them different from other guys who don't have anyone or a place of their own. They settle down and sleep for the night.
The next morning at the ranch, the boss becomes suspicious when George answers all the questions and Lennie does not talk. George explains that Lennie is not bright but is a tremendous worker. They also meet Candy, an old swamper with a sheep dog; Crooks, the black stable hand; the boss' son Curley, who is an amateur boxer and has a bad temper; Curley's wife, who has a reputation as a "tart"; Carlson, another ranch hand; and Slim, the chief mule skinner. Upon seeing Curley's wife, Lennie is fascinated with her and George warns him to stay away from her and Curley.
That evening, Carlson complains bitterly about Candy's dog, which is old, arthritic, and smells. He offers to kill the dog for Candy, and Candy reluctantly agrees to let him do so. Later, after the others have gone to the barn, hoping to witness a fight between Slim and Curley over Curley's wife, Lennie and George are alone in the bunkhouse. Lennie wants to hear the story of their farm again, and George retells the dream. Candy overhears and convinces George and Lennie to let him in on the plan because he has money for a down payment. George excitedly believes that, with Candy's money, they can swing the payment for a ranch he knows of; he figures one more month of work will secure the rest of the money they need. He cautions Lennie and Candy not to tell anyone.
The ranch hands return, making fun of Curley for backing down to Slim. Curley is incensed and picks a fight with Lennie, brutally beating Lennie until George tells Lennie to fight back. Lennie smashes all the bones in Curley's hand. Taking Curley to a doctor, Slim gets Curley's promise to say his hand got caught in a machine so Lennie and George won't get fired. Lennie is afraid he has done "a bad thing" and that George won't let him tend the rabbits. But George explains that Lennie did not mean to hurt Curley and that he isn't in trouble.
Later that week, Lennie tells Crooks about the plans to buy a farm, and Crooks says he would like to join them and work for nothing. In the middle of their conversation, Curley's wife enters and, after Crooks tells her she isn't welcome in his room and that if she doesn't leave, he will ask the boss not to let her come to the barn anymore, she threatens him with lynching. Eventually, George returns and tells her to get lost. Dejectedly remembering his place, Crooks retracts his offer.
The next day, Lennie is in the barn with a dead puppy. While Lennie thinks about how he can explain the dead puppy to George, Curley's wife enters. They talk about how they enjoy touching soft things. She tells him he can touch her hair, but when Lennie strokes it too hard and messes it up, she gets angry. She tries to jerk her head away, and, in fear, Lennie hangs on to her hair. Curley's wife begins to scream. To keep her from screaming, Lennie holds her so tightly he breaks her neck. Knowing he has done something bad, he goes to the hiding place by the stream.
Candy finds the body of Curley's wife and goes for George; both men immediately know what has happened. Candy knows that Curley will organize a lynching party, and George says he is not going to let them hurt Lennie. George asks Candy to wait a few minutes before he calls the others; then he slips into the bunkhouse and steals Carlson's Luger. When Curley comes and sees his murdered wife, he vows to kill Lennie slowly and painfully. George joins the men searching for Lennie.
As they spread out, George alone goes straight for the riverside where he finds Lennie. Lennie knows he has done "a bad thing" and expects George to scold and lecture him. George, however, is so overcome with remorse that he cannot scold Lennie but must save him from Curley's cruelty. He tells Lennie to look across the river and imagine their little farm. George describes it, as he has done many times before, and while Lennie is smiling with pleasure and envisioning the rabbits he will tend, George shoots Lennie at the back of his neck. The others arrive, and George leads them to believe Lennie had Carlson's gun which George wrestled away from him and shot in self-defense. Only Slim comprehends the truth, and he takes George off up the footpath for a drink.