Chief Bromden, the son of a Native American father and a white mother, begins the novel by relating the real and imagined humiliations he suffers at the hands of the African-American hospital assistants. While their treatment of him is tolerated, despite the fact that he is physically much larger than they are, Chief expresses a greater fear of Big Nurse, Nurse Ratched. The Nurse is identified as a woman of great power and control, who is bitter because her ruthless, machine-like efficiency is thwarted by her naturally endowed large breasts. Despite her power, the paranoid-schizophrenic Chief believes her to be in service of the Combine, a large mechanized matrix that hums behind the walls and floors of the hospital, controlling everything from the environment to human behavior.
Randle Patrick McMurphy is introduced as a new patient on the ward. McMurphy immediately distinguishes himself from the other patients in the disregard he displays for all authority. He gambles, swears, makes off-color sexual remarks, and immediately sets himself in opposition to Nurse Ratched. McMurphy verbalizes his views that Ratched is a "ball-cutter." She controls the men by encouraging them to spy on each other and participate in group sessions where they verbally brutalize each other. At first they defend Ratched, but eventually agree with McMurphy's assessment. He attempts to assert his newfound leadership role among the patients by requesting permission to watch the World Series on the ward's television set. When this permission is denied, he turns the television on anyway. Because she controls power, Ratched shuts off the electricity to the television. McMurphy, however, gets the upper hand by insisting on watching a blank screen, an action imitated by the other patients.
In Part 2 of the novel, a lifeguard, who is involuntarily committed to the hospital like McMurphy, tells McMurphy that he must adhere to Ratched's rules or risk her extending his sentence indefinitely. He backs off from his rebellious behavior, but he has already sowed the seeds of rebellion in his fellow patients. When McMurphy fails to support the patient Cheswick in his assertions that he should have access to his cigarettes, the disillusioned man commits suicide by drowning himself in the pool where McMurphy first decided to "toe the line." Following this event, McMurphy is told that the other Acutes have committed themselves of their own volition, and that they can leave whenever they please. He returns to his rebellious behavior, smashing a window to get at the cigarettes, a symbolic action that alludes to Cheswick's lost battle with Ratched. Ratched, in turn, remains passive, waiting for McMurphy to make a mistake.
Part 3 of the novel relates McMurphy's successful attempt to take several of the patients on a fishing trip. Ratched tries to scare the meeker patients away from the trip by posting newspaper clippings of bad weather and boating accidents, but the men muster their courage and go anyway. Accompanying the men on the trip is Doctor Spivey, a morphine addict who is blackmailed by Ratched to acknowledge her authority, and Candy Starr, a young prostitute who proudly displays her physical feminine attributes. The trip galvanizes the group, and they return to the hospital to exhibit their newfound individuality.
Part 4 begins with Ratched's attempts to make the other patients suspicious of McMurphy's motives. She manipulates the conversation to make it appear that McMurphy acts only out of self-interest. This assertion appears valid to Chief, who allows McMurphy to use his strength to win a bet against the other patients. McMurphy, however, redeems himself in the eyes of the other men when he defends another patient from receiving an enema from a belligerent hospital aide. A fight ensues, and Chief assists McMurphy. The two win the fight but are sent to the Disturbed Ward. When McMurphy refuses to apologize, he and Chief are given electroshock therapy.
Chief returns to the ward before McMurphy, and discovers that he and McMurphy are now heroes to the other men. He reveals to the patients his ability to speak and tells the men about McMurphy. McMurphy's absence from the ward increases his legend among the men. When he eventually returns, McMurphy attempts to hide the mental strain he is enduring with a false show of bravado. While the other men have regained their sanity and sense of individuality, McMurphy begins to behave like a parody of his old self. The other patients realize that McMurphy is in a delicate state and plot his escape. He refuses, however, in order to honor a commitment he made to Billy Bibbit. Bibbit, a 31-year-old virgin, had made a date with the prostitute Candy Starr, and McMurphy vows to stay until Bibbit and Starr have sex.
Starr and another prostitute smuggle themselves onto the ward with liquor, which, combined with the marijuana provided by the African-American night watchman, Mr. Turkle, contribute to a night of debauchery. The patients make a mess of the ward and fall asleep after planning McMurphy's escape with Starr. Everyone sleeps late, and McMurphy remains in the hospital when Ratched arrives the following morning. The group remains defiantly united against Ratched until she discovers Bibbit sleeping with Starr. She tells Bibbit that his mother will learn of his indiscretion, forcing Bibbit to betray his fellow patients in general and McMurphy in particular. Bibbit slits his throat while waiting alone in Doctor Spivey's office, an action that Ratched blames on McMurphy's influence. McMurphy responds by attempting to strangle her. He fails, but rips open her uniform to expose her large breasts, revealing her sexuality, which weakens her authority over the patients.
McMurphy is removed to the Disturbed Ward, and many of the patients assert their prerogative to leave the hospital. When he is returned, the remaining patients doubt the lobotomized body is actually McMurphy. When it is ascertained that it is indeed he, Chief suffocates him and escapes.
While Chief's escape is often interpreted as McMurphy's final victory over Ratched, some critics are less certain. For example, the novel's first five pages are related as occurring in the present and recount observations of the hospital ward, hinting that perhaps Chief has been recommitted and that the Combine eventually wins. Chief relates that a bluetick hound smells his own "fear burning down into him like steam." He writes, "It's gonna burn me just that way, finally telling about all this, about the hospital, and her, and the guys — and about McMurphy."