Alice Crewe is an independent, short-tempered 17-year-old who is devoted to her mother. After years of running from bizarre bad luck — their apartment flooded on a rainless night; a mountain lion entered another home and peed all over their things; one of their landlords sleepwalked into a swimming pool — they finally settle in New York City.
Alice’s mother, Ella, deems them “free” of the bad luck when her mother, Althea Proserpine dies. Althea was the author of a collection of dark fairytales about a world called the Hinterland. The book became a cult classic, but mysteriously, copies of it are extremely rare. Althea became a recluse, living in a hidden mansion named The Hazel Wood.
Alice never met her grandmother, or her father, and Ella refuses to talk about either of them. Once Althea is dead, Ella marries a rich New Yorker named Harold, and she and Alice move into his exclusive apartment with his daughter, Audrey, who is the same age as Alice.
Alice is shocked when she sees a man from her past sitting in the coffee shop where she works. When she was 6, the man kidnapped her and told her he was taking her to meet Althea. They were found a few days later, and the man was arrested. He did not hurt Alice, and for many years she believed he was her father.
The man runs away before she can speak to him, but leaves behind three items: a feather, a bone and a comb. Alice puts the items in her backpack. Although she wants to tell her mother about the strange incident, Ella and her husband are arguing when Alice returns home and she doesn't want to add to her mother’s stress. In the morning, Audrey warns Alice that their parents are getting a divorce.
Alice encounters a couple of strangers on the way back from school, which worries her. They seem familiar, but in a dangerous way. She hurries home and finds the apartment empty of people. A rancid smell fills the space. Nothing is missing, except her family.
An envelope on her bed holds the title page to one of her grandmother’s stories, “Alice-Three-Times.” Terrified, as well as angry, Alice seeks help from her only friend at school, Ellery Finch. Finch is from an insanely wealthy family and is the only person she knows who has actually read her grandmother’s book, The Tales from the Hinterland.
Finch accompanies Alice back to her apartment. She is relieved to see Harold’s briefcase in the hall until her stepfather appears, pointing a gun at her. He rants about how he tried to love Ella, but all she did was lie to him. A distraught Audrey calms him down. She tells Alice that someone kidnapped them. They let her and her father go so they could tell Alice that the Hinterland had Ella.
Alice and Finch get something to eat in a café, and Finch tells the creepy story of “Alice-Three-Times.” Alice was a princess with black eyes. She would stay the same size for years. Then she'd grow overnight to be several years older. When she seemed to be 17, the queen ordered her to marry. Alice set a test. Only a suitor who brought ice from the north could marry her.
All failed, and were killed, until a pair of brothers brought several cubes. They did not want to marry her but to make her their servant. Alice ate the ice and turned to ice herself. The brothers took her anyway.
The following morning, the older brother was dead, frozen with a look of horror on his face. The younger brother left the bodies of his brother and Alice behind. The next morning, his horse was frozen. The following night, Alice came to him and kissed him, killing him as well.
As they leave the restaurant, Finch spies a woman he swears is a character from the Hinterland, Twice-Killed-Katherine. As they watch, the woman releases a shadow from a birdcage. The shadow unfolds into a bird, latches itself onto a man passing by, dropping him to the ground. The woman transforms into a younger, healthier version of herself, as the bird returns to its cage. The victim now appears ancient and lost. Finch assures Alice that Katherine would not hurt Ella because she only attacks men. He takes Alice to a friend’s home where they can spend the night.
In the morning, a blackbird visits the friend's home with an envelope in its beak. Inside the envelope is another page from Althea’s book. Finch has located a bookseller with a full copy and has already placed a hold on it. At first, the seller is thrilled to have them buy it, until a Polaroid picture falls out of it. The picture was taken of Finch and Alice sleeping, sometime the previous night. A boy then runs in and steals the book before they can stop him.
Alice and Finch rent a car and drive to Upstate New York, where they believe they will find the Hazel Wood. After spending the night in a motel, on separate beds, they wake to find their rental car filled with salt water and fish, thanks to the Hinterland. They take a bus to where they believe they will find the Hazel Wood.
When they get off, Finch tries to convince Alice to leave the area. He admits he promised someone he would bring her to the Hazel Wood, but now he thinks it's a bad idea. Unfortunately, Twice-Killed-Katherine and another boy find them before they can leave. Katherine threatens to kill Finch unless Alice kills herself. The boy cuts Finch’s throat. He creates a rift in the air and carries Finch’s bleeding body across it, then disappears. Katherine takes Alice to a forest called the Halfway Wood and throws her out of the car, telling Alice that she will wander forever until she chooses death.
Alice begins her trek through the woods, surprised to discover she has the feather, comb and bone in the pocket of her jeans. When a creature demands payment to cross an icy lake, Alice pulls the comb from her pocket. It has transformed from cheap plastic to beautiful mother of pearl. The creature allows her to pass. That night, the bone Alice carries transforms into a kind of sword. The sword sings a song that chases away creatures that want to harm her. She then must stab a woman with it to escape.
As dawn breaks, Alice knows she must reach the Hazel Wood before the sun rises or she will die. She pulls out the feather and it grows into wings. She flies across a great ravine toward the Hazel Wood gates. Inside the mansion, Alice relives memories from her mother’s past until she finds one with Althea in it.
Althea tells Ella about the Hinterland — how she had to find a storyteller in order to find a way to build a bridge between their worlds so she could return home. As Althea continues to speak, she becomes older, and Ella fades away. Alice learns that she is Alice-Three-Times. Ella found her in the Halfway Wood and took her. Alice has become a bridge between the worlds. Althea forces her into the Hinterland, hoping the storyteller will allow her to die now that Alice has returned.
Alice wanders in the forest of the Hinterland until she finds a traveler, a human from our world who now lives in the fairytale kingdom. He tells her there are other refugees and that she must stay away from Stories. Humans who enter a Hinterland story die horrible deaths. He directs her to a woman named Janet, who helps refugees acclimate to the Hinterland.
After learning Alice’s true identity, Janet tells her to let her Hinterland instincts take over. They will guide her to the Story Spinner and her story. The Story Spinner takes Alice back to the castle where her story began. Alice starts living the story Finch told her, as a baby with black eyes who enjoyed being cruel to others.
As a young woman she swallows the ice the brothers bring her and turns into ice herself. At night, she kisses the older brother and freezes his heart. The younger brother then tries to unfreeze her. She recognizes him as the man from her past who once kidnapped her. Before she is unfrozen, the resurrected older brother kills the man. It seems the story does not want to end, but will keep repeating forever.
When Finch and Janet suddenly appear, Alice and the younger brother are able to escape their story. But the Hinterland continues to try to lead them back until Alice begins to weave her own tale. She tells about a girl who escaped the Hinterland to return to her mother, who lives in a world of matter and particles, not of story. As she speaks, a doorway opens, and she steps through. Finch, the brother and Janet follow her back to our world. But then Finch and Janet return to the Hinterland, having found a way to live there.
Alice is taken to the hospital. When she wakes, she sees her mother. Two years have passed since she went into the Hinterland. In the hospital, Ella tells Alice that she [Ella] was locked in an empty apartment for three days. She mysteriously found the door unlocked after the third day. She tried to enter the Halfway Wood but was denied.
Her stepfather divorced Ella, so she got an apartment in a nearby town and searched for a way into Halfway Wood as often as she could. She searched until the day Alice walked out of the woods.
Once Alice heals, she struggles to re-enter her life as a normal teenager. After a year, she sees Janet in a café and learns that things changed once she left her story. Others wanted to leave as well. Now the travelers and characters can come and go.
Finch did not return to the real world, as he wanted to explore other worlds. Alice and other Hinterland refugees try to create normal lives for themselves as their fairytale world slowly dies because the characters have left their stories.