The film starts with a brief introduction in the 19th century American West featuring a bald eagle gliding over the homeland of the mustangs, showing several western US National Parks. There is then a scene showing the birth of a dun Kiger Mustang, Spirit. Spirit soon grows into a stallion, and assumes the role of leader of the herd, whose duty it is to keep the herd safe, demonstrated when he saves two foals from a mountain lion.

    Spirit is a courageous leader, but has a serious mischievous streak and great curiosity. Spotting a strange light one night not far from his herd, the stallion is unable to control his curiosity and moves towards it. To Spirit's surprise, he finds restrained, docile horses, and two-legs (possibly wranglers) sleeping around a campfire. They wake up, and seeing him as a magnificent specimen, chase and capture him, then drag him to a US cavalry post. During this time, the army is fighting the Indian Wars and taking over the soon-to-be western United States. Frightened and confused, all around him Spirit sees horses used as 'slaves', branded and putting up no resistance to being ridden.

    There, he encounters "The Colonel". The Colonel decides to tame the mustang, refusing to believe the idea of Spirit being too stubborn, but Spirit manages to fight off the brander even when heavily restrained and throws off all who attempt to ride him, impressing the other horses and reigniting their spirit. Trying to punish Spirit for stubbornness, The Colonel orders him to be tied to the post for three days with no food or water.

    During this time, a Lakota Native American named Little Creek is also brought into the fort and held captive until he answers questions on the lands. Spirit is then broken in by the Colonel, who speaks his idea of how any wild horse can be tamed. Spirit gets a second wind and throws off the Colonel. After managing to escape, Spirit travels with Little Creek to freedom.