Holes is built around the intersecting stories of two settings (Camp Green Lake today, and Green Lake of 110 years ago) and three families (the Yelnats family, the Zeroni family, and the Walker family).

When he is falsely convicted of stealing sneakers that were donated for charity, Stanley Yelnats is sentenced to Camp Green Lake. When Stanley arrives, he is quickly processed and put to work digging holes. He and the other boys must dig countless five-by-five-foot holes “to build their character.” Stanley gets to know some aspects of his new life all at once: the formal structure of the camp, with the Warden at the top, Mr. Sir next in command, and Mr. Pendanski as his immediate counselor; and then an informal but complex community of boys, each of whom has his own nickname. Stanley is overweight and has a lot of trouble digging the holes at first, but he eventually settles into a routine.

If the campers find anything interesting, they are to let an adult supervisor know. When Stanley finds a gold tube with the initials “KB” on the bottom, he lets another boy, X-Ray, claim he found it in his hole because X-Ray has been there longest and the boy who finds something special gets the day off from digging. This sets Stanley moving up the informal hierarchy among the boys. He moves up even further when another of the boys (Magnet) steals Mr. Sir’s bag of sunflower seeds, and Stanley takes the blame without getting the other boy in trouble.

However, Stanley’s position among the boys is jeopardized when he starts teaching a boy named Zero how to read and Zero starts digging part of Stanley’s hole in repayment. This leads to tension. Some boys tease him, and Zigzag starts to pick on Stanley. Mr. Pendanski encourages Stanley to stand up for himself, and a near riot breaks out. Zero defends Stanley but afterwards runs away into the desert.

Days pass. A new boy named Twitch comes to camp to replace Zero. Twitch had stolen cars when out in the world, and this gives Stanley the idea to steal the water truck and drive out looking for Zero. Unfortunately, he wrecks the truck and has to go after Zero on foot.

Stanley walks toward the rock formation called Big Thumb. He stumbles across Zero, who had taken shelter under the remains of a wrecked old boat named the Mary Lou. The Mary Lou had belonged to Sam the onion man, who had lived in the town of Green Lake 110 years earlier, when there had actually been a lake there. Sam, a black man who sold onions for food and in various folk medicine concoctions, had been killed by the people of Green Lake when he was seen kissing Miss Katherine Barlow. Katherine Barlow was the local schoolteacher, and a rich young local named Charles “Trout” Walker had wanted her, but she turned him down. When the townspeople killed her beloved Sam, pretty Miss Barlow, who had until this time been known mainly for her peach preserves, turns to a life of crime, becoming “Kissing Kate Barlow,” the famous bandit. However, when the people of Green Lake killed Sam, they also killed their town: no rain fell after the lynching, and both town and lake dried up. Kate comes back to visit the town twenty years later and is surprised by Trout and his wife Linda, one of her former students. They try to get her to tell them where her loot is, but she refuses, and they kill her.

It is a few of Kate’s ancient peach preserves that kept Zero alive when he was in the desert. It is also her fortune, part of which was stolen from one of Stanley’s ancestors, that the Warden had the boys digging holes to find. Readers learn at the very end of the novel that the Warden, who rules Camp Green Lake with fierce determination and fingernail polish made from rattlesnake venom, is Trout Walker’s descendant.

The rock formation that Stanley and Zero had headed toward also once sheltered Stanley’s ancestor over a century earlier. Zero is sick, and Stanley has to take care of him. As he does, the boys talk. Zero shares his family’s story, which includes explaining how he and his mother became homeless, that she went away and did not come back—and that Zero had stolen the sneakers that Stanley had been charged with taking.

After nursing Zero back to health, feeding him some of the onions that grew where Sam had planted them, and drinking from the same spring that had saved another Yelnats a century earlier, Stanley tells Zero about the treasure. They head back to camp and sneak in at night.

They dig in the hole where Stanley had found the metal tube with the initials on it—and they find a suitcase full of money. However, the Warden, Mr. Pendanski, and Mr. Sir surprise them. Before they can take the suitcase away, poisonous lizards and a tarantula climb all over the boys and the suitcase, producing a face-off. Before anyone can figure out how to get rid of the poisonous lizards, a lawyer and the Texas Attorney General show up, saving the boys from the clutches of the Warden.

As the sun rises, the lizards eventually seek shadier spots, and the boys escape unhurt. Stanley does not have to stay at camp, and neither, through a lucky twist, does Zero. The Warden had deleted all records of him from the computer when he ran away into the desert so that there would be no proof of his having been there. He and Stanley split the money, though Stanley’s family needs it less now: while he was away, his inventor father had a breakthrough, discovering a way to kill foot odor. Zero, whose real name is Hector, is reunited with his mother. Everything goes better for both families from this point on because when Stanley carried Zero down from the Big Thumb, he lifted the curse that his great-great-grandfather Elya Yelnats had incurred when he had failed to carry Madame Zeroni, Hector’s ancestor, up the mountain in compensation for her advice.