The Friends describes a transitional period in the life of Phyllisia Cathay as she learns about herself, as well as the responsibilities involved in both family life and friendship. As the novel opens, Phyllisia, the first-person narrator, is sitting in her classroom contemplating her dislike for Edith Jackson, a poorly dressed classmate who is determined to become her friend. When Edith enters the room, typically late, she is mocked by Miss Lass, the teacher. Edith simply disregards the snub, trying instead to speak to Phyllisia, who ignores her.

Phyllisia, who has recently moved from the West Indies to Harlem, feels lost and unhappy. The other children constantly mock her and call her names. They dislike her accent, her intelligence, and her willingness to respond in class. Their hostility culminates in a fight between Phyllisia and Beulah, a much larger and tougher classmate. Phyllisia astonishes everyone (including herself) by butting Beulah with her head, which enables her to escape. Running home, she feels even more alone since no one, child or adult, had tried to help her. She contrasts this with her previous life on the island where "everybody cared about everything.'' When her mother, Ramona, questions Phyllisia about her disheveled appearance, she learns that both Phyllisia and her sister, Ruby, have had problems at school because they are seen as outsiders.

That evening, Calvin Cathay, Phyllisia's father, brings two strangers home, Cousin Frank and Mr. Charles. Introducing the men to his family, he hugs Phyllisia, then heartlessly dismisses her as ugly. This makes Phyllisia feel even more isolated, the ugly duckling in a handsome family.
The next day, when Phyllisia walks into the classroom the students boo her, while Beulah enters to cheers. Miss Lass refuses any assistance; Edith, however, warns that no one should pick on her best friend, Phyllisia. Astonishingly, Phyllisia feels the hostility of the students dissipate. Initially, she is grateful, but this soon turns to anger because she doesn't want to be linked in any way to this dirty and disheveled girl.

Although Phyllisia had been looking forward to warmer weather, the summer bring several disturbances. Gradually, Phyllisia becomes aware that her mother is very ill. As the heat mounts, tension in the neighborhood escalates and the newspapers predict a "long, hot summer'' where the cities will explode in riots. Even in the classroom, the heat affects everyone. Miss Lass eventually explodes into a virulent racist attack on her students, driving Phyllisia from the room. Edith follows her and the two girls explore New York City. For the first time, Phyllisia enjoys Edith's company. However, when she witnesses Edith stealing, it brings back her dislike. When they return to Harlem, Phyllisia is determined to abandon Edith and find her own way home, in spite of the fact that Edith has warned her that there will be trouble soon. Just as Phyllisia turns to escape, the police charge the crowd. Edith again saves Phyllisia, pulling her out of the melee. As the two girls flee, Phyllisia glances back and sees Calvin struggling with a mounted policeman.

The girls run to Edith's apartment where Phyllisia meets the Jackson family. Phyllisia notices that Edith suddenly seems older under the weight of the responsibly of caring for her four younger sisters. When she returns home, Calvin is angry with her, not for being in the riot but for associating with Edith. He warns her never to socialize with any "ragamuffins" again.

The section opens in Central Park where Phyllisia is picnicking with Edith and her sisters. Although she knows it is cruel, Phyllisia is bragging about the elegant new clothes that she'll be wearing to high school. Edith shifts the subject, asking about Phyllisia's mother and criticizing Calvin for not treating Phyllisia fairly. When they are about to leave, Edith picks some flowers for Phyllisia's mother. Ramona, who is delighted to learn that her daughter has a friend, wishes to meet her. However, Phyllisia refuses because she is too ashamed of Edith's clothes: this automatic betrayal of her only friend stuns her.

Five days later, Phyllisia visits the Jacksons' apartment, learning that Mr. Jackson has disappeared. Edith swears her to secrecy because she is afraid that the family will be separated. Soon Edith drops out of school. Gradually, Phyllisia discovers that she is becoming paired with Miriam Robbins. Just a few months ago, Phyllisia desperately wanted this friendship, but now she finds Miriam to be shallow and uninteresting compared to Edith. As Ramona becomes increasingly ill, her moods become erratic. When Phyllisia attempts to comfort her mother by mentioning that Miriam thinks she's beautiful, Ramona bares her chest, showing the scars where one breast has been removed. Desperately, she warns the girls against relying on something as superficial and transitory as beauty.

Phyllisia doesn't see Edith for over two months. During that time, Norman, one of the boys in the neighborhood, has been flirting with her. Ramona, who is now certain that she is dying, seems to have moved into another world. Finally, Phyllisia goes to see Edith, only to discover that she is at an employment agency. Edith eagerly accepts when Phyllisia invites her home. Both Ramona and Ruby are charmed by Edith, which angers Phyllisia. When Ruby compares herself and Phyllisia to Edith, Phyllisia strikes out in fury, shouting insults directed at Edith. Calvin enters in the middle of the scene and throws Edith out, which secretly pleases Phyllisia. That evening, Ramona tells Phyllisia that she is dying. She then reminds Phyllisia that she will have to deal with her guilt over the incident with Edith in some way: "You must not forget this day—what you have done today—easily.’’

Ramona's death, coupled with her own betrayal of friendship, forces Phyllisia into a trance-like state where she is scarcely aware of the world around her. At the funeral, convinced that Edith is waiting to comfort her, Phyllisia runs outside screaming Edith's name.

Ruby wakes Phyllisia from a recurring nightmare where both her mother and Edith appear. Phyllisia has been unable to eat; she is weak and too ill to attend school. Ruby tries to entice her with her favorite food, but all Phyllisia wants is to be left alone. She believes the spirit in the dream won't allow her to eat. Eventually, Calvin decides to force-feed Phyllisia. Every day, he threatens her with a beating unless she eats, and gradually her health returns.

Throughout her illness, Phyllisia longs to see Edith, but once she recovers she is afraid to defy Calvin. She spends most of her time studying, socializing only when Ruby forces her. One evening when Ruby drags her to a party at Miriam's, she learns that Randy, Edith's brother, has been killed by the police. She rushes to Edith's building, only to find herself afraid to go in. When she returns home, Calvin is enraged because he caught Ruby kissing her boyfriend, Orlando. He keeps both girls virtual prisoners in the house. Cousin Frank and Mr. Charles try to reason with him to no avail.

Ruby obeys his rules, hoping to regain his trust, but Phyllisia rebels. She starts skipping school, picking up a boy in the park. When Calvin learns of this, he decides to send the girls back to the island. After visiting Calvin's restaurant, Phyllisia learns that she has been deceiving herself about her family's wealth and status in order to feel superior to those around her. She decides that she has to see Edith in order to renew their friendship. When she gets to Edith's apartment, however, she learns that Ellen, the baby of the family, has died and the other children have been taken away. Edith, too, will be going to the orphanage soon. Phyllisia tells Edith that she will always be her friend, and will visit her no matter where she goes.

When Phyllisia returns home, she makes her first real attempt to communicate with her father in order to convince him not to send them to the island. She finally breaks through to him, and he indicates that they can stay in Harlem. Phyllisia will be able to keep her promise to Edith.