Kino, a young pearl diver in La Paz, enjoys his simple life until the day his son, Coyotito, is stung by a scorpion. The wealthy town doctor will not treat the baby because Kino cannot pay the doctor's fee, so Kino and his wife, Juana, are left only to hope their child is saved. That day Kino goes diving, and finds a great pearl, the Pearl of the World, and knows he is suddenly a wealthy man. The word travels quickly about the pearl and many in the town begin to plot ways to steal it. While the townspeople plot against Kino, he dreams of marrying Juana in a church, buying a rifle, and sending Coyotito to school so that he can learn to read.
Kino believes that an education will free his son from the poverty and ignorance that have oppressed their people for more than four hundred years. The doctor comes to treat Coyotito once he learns of Kino's pearl, and although the baby is healed by Juana's remedy, the doctor takes advantage of Kino's ignorance. He convinces Kino that the child is still ill and will die without the care of a doctor. The doctor then manipulates Kino into unwittingly revealing where he has hidden the great pearl. Kino moves the pearl when the doctor leaves. That night, an intruder comes into Kino's hut and roots around near the spot where Kino had first buried the pearl.
The next day, Kino tries to sell the pearl in town. The pearl buyers have already planned to convince Kino that the great pearl he has found is worth very little because it is too large. This way they can purchase the pearl for a low price. But when the buyers try to cheat Kino, he refuses to sell the pearl and plans to travel to another city to sell at a fair price. His brother, Tom Juan, feels Kino's plan is foolish because it defies his entire way of life and puts his family in danger. Kino is now on his own, although he doesn't know it yet.
Juana warns Kino that the pearl is evil and will destroy his family, but he refuses to throw it away because it is his one chance to provide a different life for his family. That night, Juana takes the pearl and tries to throw it into the sea, but Kino stops her and beats her. On his way back to their hut, Kino is attacked and he kills the man in self-defense. Juana goes to gather their things and escape and finds the floor of their hut completely dug up. While she's inside the hut getting the baby, someone lights it on fire.
Kino, Juana, and Coyotito hide with Kino's brother for a day before embarking on their journey to a new city under the cover of darkness. While they are resting during the day, Kino discovers that there are trackers following them. He knows that they will steal the pearl and kill his family if they catch them. To escape, Kino and Juana take the baby and run to the mountains where they hide in a cave at nightfall.
The trackers camp just below the ridge where they are hiding. Kino sneaks down in the night to kill the trackers, but before he can attack them, Coyotito cries out. The trackers, thinking it's a coyote, shoot at the dark cave where Juana and Coyotito are hiding. As the shot is fired, Kino springs on the trackers and kills them all.
Unfortunately, Coyotito was killed by the first gunshot, and Kino's journey with the pearl ends in tragedy. Realizing that the pearl is cursed and has destroyed his family (as Juana forewarned), Kino and Juana return to La Paz and throw the cursed pearl into the sea.