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Two abandoned girls, Candy White and Annie, grow up as the best of friends at Pony's Home - an old church and orphanage run by Miss Pony and Sister Mary. They sabotage visits from possible future parents in order to be unadopted. Meanwhile Candy and another orphan, Tom, often get into verbal and physical fights. While the dark-haired Annie is a docile girl, the blond-haired Candy is an incorrigible tomboy who climbs trees, loves mischief and has an excellent lasso throwing skill. When the wealthy farmer Steve adopts Tom, Candy also realizes gradually that she will miss Tom. On his farewell day, Miss Pony and Sister Mary reveal that it was young Tom who had first noticed Annie and Candy being left by side outside of the orphanage all those years ago.

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Mr. Leagan returns home from a long absence to find Candy downgraded to a servant, and decides Candy deserves a holiday at Pony's Home. Once there, Candy learns their Neighbour, Mr. Cartwright, sold Father Tree to the eccentric Mr. Flannigan from Washington. He wants the tree all to himself, because he believes it would surrender the best business ideas. Candy leads the orphans and farm animals into an insurgency against the workers preparing the cutting and transportation of the tree. Mr. Flannigan and Candy hold a climbing match and, at a stalemate in the treetop, the two negotiate their options. Candy makes valid arguments for the tree to remain at Pony's Hill, which prompts Mr. Flannigan to decide to buy out Pony's Home and build his own home instead. Candy then gets the idea to make it appear as if the tree is dying by painting all the leaves yellow. The ruse almost works, but for the rain that washes all the paint off. Furious, Mr. Flannigan orders his workers into action were it not for a single orphan high up in the tree crying out to save their father.

Neil attempts to poison the horses so he and Eliza will frame Candy for it, however, a shadow rushes into the barn and punches him, before running out again just as Candy arrives. Eliza blames Candy for Neil's black eye at the first opportunity, and torn between his pride, Eliza's wishes and his mother's insistence, Neil elects to blame Candy. Candy realizes it must have been Albert. She writes him a letter, puts it into a bottle, throws it in the river and follows it from the bank, reasoning it will lead her to Albert. He finds her in the morning and takes her to his home, a large but ruined estate of the Ardley family, which he shares with several forest animals. When several gunmen arrive at the old house, Albert makes a hasty retreat and leaves Candy to deal with them by herself. They take her with them to the Ardley home where the boys hope to convince their great-aunt to adopt Candy: only she is able to teach "naughty" Candy to behave. But Eliza spoils the happy conclusion by revealing Candy has led a vagabond life. Disgusted with Eliza and his great-aunt, Anthony starts to see the benefit in leading the life of a vagabond, and, for that day, they gallop off on his horse.

Someone has cut Anthony's rose bushes and stole his pink roses. All evidence points to Candy who has a vase full of beautiful pink roses in her barn, which she assumes are a gift from Anthony. When Candy learns from Alistear what has occurred, she suspects Neil. Neil explains the thorn scratches on his hand as the result of playing with Sylvia, the family cat. When Anthony does not want to see Candy, she is sure that everybody believes the worst of her. Archibald finds a witness who saw Neil leave the Leagan estate the night before and the three young men trick Neil into confessing. But by then Candy is already gone in Archibald's rowboat to return to Pony's Home on the river that changes into rapid water leading to a huge waterfall. The vagabond Albert saves her from drowning and, before disappearing, directs her to write him a note in a bottle if she should ever require his assistance. When the three worried Ardley boys find Candy, Anthony explains he did not want her to see his birthday gift yet, a new rose called 'Sweet Candy'.

When Mrs. Brighton and Annie come to visit the Leagans, Annie pretends not to know either Candy or Klint and Mrs. Brighton begs Candy to keep Annie's secret. Up to their usual tricks, Neil and Eliza press Annie into horse riding, frighten the horse Cleopatra into a panicking gallop and then persuade the adults that Candy caused the incident. Candy races after Annie, manages to grab the reins and halt Cleopatra. Finally alone, Annie admits she is unhappy and cannot forget everything and everyone that ever made her happy. When Candy comes to blows with Neil, exhorting a promise from him to never hurt Annie again, Eliza perverts the situation so that either Annie or Candy have to confess the truth about Annie's past. Mrs. Brighton stops Annie in time from speaking up and suggests that an apology from Candy will suffice. After Annie leaves with her mother, the old gardener finds Candy crying in her barn and assures her that Annie is still her friend: the ribbon Annie tied around the post outside Candy's barn is proof of it

Mrs. Leagan banishes Candy to sleep in the barn. While the horses and she appreciate each other and Candy is happy to sleep with Klint, Candy hopes to conceal the truth from Anthony, as well as from little orphan John and Sister Mary when they visit unexpectedly. Mrs. Leagan agrees to the charade in the face of Sister Mary. But Candy's dirty and bruised working hands cannot hide the truth. Sister Mary reveals to Candy what she knows and wants to take Candy back home with her. But after meeting the Cornwell brothers, she thinks Candy has all she needs to be truly happy: friends. Realizing that Anthony must know too, Candy fears he will avoid her from now on. But Anthony enters the barn, apologizing for not being a gentleman the day before and letting her carry his load when he knows she works so hard already. He presents her a rose, promising that he will give her a more beautiful one on her next birthday, which will be in May from now on.

When Mrs. Leagan and her children return from their outing, Mr. Leagan notices Candy, who is confined in the attic, is not amongst them. After an argument with Mrs. Leagan, Mr. Leagan listens to Candy and she procures his consent for Klint to live in the stables and garden. Candy exercises night and day to walk elegantly, in accordance to her resolution to become more elegant in order to please Mrs. Leagan, who is compelled to take notice and yet puts Candy's efforts down. When Eliza points out that Candy constantly seeks out the company of the servants and refuses to be her playmate, Mrs. Leagan decides to downgrade Candy to a servant, while Mr. Leagan is away on business. Distressed, Candy wanders to the closed gates of the Ardley estate, in the hope to meet her prince. Instead she meets Archibald Cornwell in adventurous circumstances. Even if Archibald is not her prince, it seems that the Ardley estate houses plenty of interesting and friendly people.

Upon entering the ball, Candy finally meets her prince, Anthony Brown. Strangely enough, Eliza's favorite remembers the encounter at the rose gates, but not the hilltop meeting. Great-aunt Elroy chastises the Leagans for bringing their maidservant in such informal dress if she is Archibald's and Alistear's special guest. The two Cornwell brothers and Anthony intercede on Candy's behalf. Tricked by Eliza, Candy gets locked up inside a dark room in a hallway that fits the description of Archibald's ghost story. Meanwhile, Eliza detains Anthony from searching for Candy by dancing with him. In a panic Candy manages to break down the door and Anthony finds her. The brothers gift her a ballroom dress and Anthony gifts her some of his late mother's jewelry. Candy joins the dancing with all three young bachelors, making a good impression. Candy asks Anthony whether he knows Pony's Hill, but he tells her no, confirming that, though he looks like her prince, Anthony cannot be the prince of hill after all.