The sun rises over a riverside encampment of new inexperienced soldiers in the blue Union uniforms of the 304th regiment from New York. A tall soldier, Jim Conklin, tells the others that he heard a rumor about the generals' plan: the regiment will soon be in battle. Some soldiers in the regiment believe the rumor, others are skeptical and tired of infantrymen trying to predict their commanders' strategies. A young private, Henry Fleming, listens to the debate, then returns to his bunk to think. With dreams of fighting in glorious battles, he had enlisted against his mother's will. Now Henry worries that he might act cowardly and run away during fighting. He returns to ask Jim and another soldier, the loud and overconfident Wilson, if they ever fear running away. Jim says that he'll do what the other men do. Henry feels eager for a battle to test his courage.
The regiment eventually does march and digs into position in the woods. With battle imminent, Wilson gets spooked and nervously gives Henry a packet of letters to return to Wilson's family in case Wilson dies. Soon, an advance brigade of blue soldiers runs past in crazed retreat, which shakes Henry's self-confidence. The gray enemy approaches through the trees and Henry, feeling like a cog in a machine, fires frantically. The enemy retreats and the soldiers congratulate each other. But another enemy charge comes on, and Henry turns and runs away with a terrified mob of fellow blue soldiers.
While he runs, Henry feels that he did the right thing in running away. He reasons that self-preservation is natural, and thinks that the generals and any soldiers who stayed to fight were fools. When the retreat stops, Henry overhears that his regiment actually did defend their position against the odds. Ashamed, Henry skulks off into the woods alone, and comes upon the corpse of a dead soldier in a "chapel" of trees. Henry is horrified by the gruesome sight of ants running over the discolored face. He flees and joins a retreating procession of wounded soldiers. Walking along, a tattered man questions Henry about his injuries, but Henry, feeling deeply guilty, moves away from him. Henry privately wishes for his own wound, "a red badge of courage." Henry sees a grievously hurt, almost ghostlike soldier who is refusing any assistance. Discovering the man to be Jim Conklin, Henry promises to help. Jim runs wildly into nearby fields and Henry and the tattered man follow. Jim falls dead. The tattered man, getting worse himself, keeps asking about Henry's wound, but Henry abandons him.
Close to the battlefield, Henry encounters a large group of blue soldiers running away. He grabs one to ask "Why—why—" but the soldier bashes his rifle on Henry's head to escape. Now bleeding and disoriented, Henry wanders in search of a safe place. An anonymous cheerful soldier guides Henry back to his regiment's camp. Henry lies to his regiment that he was shot in the head. His wound is treated by a quiet subdued Wilson. The next morning, Wilson asks Henry for his packet of letters. In comparison with his friend's embarrassment about fearing death, Henry soon feels strong, proud, and ready to fight.
Their regiment returns to the fight and takes part in a raucous deafening battle. Henry goes berserk, firing even after the enemy retreats. His companions view him with astonishment and the regiment's fiery lieutenant praises his bravery. Henry is dazed but pleased—he has overcome his fears without even being aware of the process.
Between battles, Henry and Wilson overhear an insulting officer put down their regiment for fighting like "mule drivers." They desperately want to prove him wrong. The regiment is sent on a dangerous charge against enemy lines, and many of Henry's companions are killed. When the color guard gets shot and falls, Henry grabs the regimental battle flag and rallies the exhausted regiment to a near victory. Afterwards, other soldiers hear the regiment's commanders praising the bravery of Henry and Wilson. Still, Henry is angry at the insulting officer and dreams of being killed in a glorious battle as his revenge.
Across the field, a wave of gray soldiers overtakes a crucial fence. Running with the flag, Henry leads his frenzied regiment to overwhelm the enemy soldiers. Wilson captures the enemy's battle flag. They all congratulate each other and feel that "they were men." The regiment is then ordered back over its gained ground all the way to its original camp on the river. Henry reflects on his triumphs and the guilt still haunting him, but feels matured and tranquil, yearning for peace.