The readers are first introduced to Chief Bromden, the narrator of the novel who has been in the mental hospital for fifteen years. As a "Chronic", a type of patient that cannot be cured, the half Columbia Indian pretended to be deaf and dumb with much success. In the hospital the patients are under the power of Big Nurse Ratched. She was a former army nurse and leads a strict daily routine. She encourages the "Acute" patients, ones that are young enough to 'fix' to spy on and record each other's weaknesses and faults in a big book.

In order to maintain her oppressive control, she orders the more rebellious patients to either have lobotomies or to undergo electro-shock therapy. One day, R. P McMurphy arrives and right away causes a stir in the ward. He was transferred from the Pendleton Work Camp because he thought it would be much easier to be in the ward and pretend to be whatever the court wanted him to be.

In this case it was to be insane. He is not a usual admission. He quickly rebels against the rules and introduces himself to all the patients as a gambling man who loves cards and women. He refuses to conform to the rules of the Big Nurse, but is told by the patients that it is very difficult to do since the Nurse possesses such totalitarian authority. McMurphy however still makes a bet with the patients, claiming that he could make Nurse Ratched lose her temper before she could make him lose his.

McMurphy wins his bet when he and the other patients, whom he has also encouraged to rebel stage a protest to change the television schedule so they could watch the World Series. Nurse Ratched becomes infuriated and demands that all patients continue their daily chores scheduled for that time. However during free time, McMurphy learns that instead of staying until his original sentence from the work camp was over, he would have to receive permission from the staff, particular Nurse Ratched to leave the hospital. Because he wants to leave the place, he begins to submit to her control. But by this time, his strong actions and will have made him a leader towards the other patients, and as they see him weaken, they too lose their will and personal strength.

Their sanity depends on McMurphy. Chiswick, one of the patients is distraught by McMurphy's surrender so he commits suicide by drowning himself. McMurphy is sent to electro-shock therapy, also known as the "Shock Shop" after standing up to the staff in aid of a fellow patient. Bearing the weight and responsibility of being leader to the other patients had proved to be too much for McMurphy and it weakens his own sanity. McMurphy still manages to arrange a fishing trip for him and some patients. The trip leaves the patients in high spirits after they all catch big fish and drink the night away.

McMurphy also arranges for Billy Bibb it to lose his virginity to Candy Starr, a prostitute from Portland. The patients urge McMurphy to escape after seeing him get weaker. He says that he will leave after Billy's date with Candy. However when it was time for him to go, McMurphy could not bring himself to leave because he was incapable of dealing with the outside world like the rest of the patients. Nurse Ratched finds out about Billy's sexual experience with Candy and threatens to tell his mother. Billy then commits suicide by cutting his throat after going hysterical.

McMurphy attacks Ratched and as a result is lobotomized. By this point it has become clear to the reader that Nurse Ratched does not have the same power over the patients. Her crazy and domineering authority is no longer present, which enables to the patients to check out and escape. But before Bromden leaves the hospital, his home for the previous fifteen years, he strangles McMurphy so he would not have to live his life as a vegetable.