In a futuristic Japan, an outbreak of canine influenza spreads throughout the (fictitious) city of Megasaki with the risk of becoming contagious to humans. The city’s authoritarian mayor, Kenji Kobayashi, ratifies an official decree banishing all dogs to Trash Island, which is immediately approved despite the insistence of Professor Watanabe, the mayor’s political opponent, who states he is close to creating a cure for the dog flu. The first canine deported from the city is a white and black-spotted dog named Spots Kobayashi, that served as the bodyguard dog of 12-year-old orphan Atari Kobayashi, the mayor’s distant nephew and ward.
Six months later, Atari hijacks a plane and flies it to Trash Island (now nicknamed “Isle of Dogs”) to search for Spots. After crash-landing, Atari is rescued by a dog pack led by an all-black canine named Chief, a lifelong stray. With their help, Atari first finds a locked cage that presumably contains Spots’ skeleton, but learns that it is not him. They then fend off a rescue team sent by Mayor Kobayashi to retrieve Atari. Atari decides to continue his search for Spots, and the pack decides to help him, but Chief declines because of his refusal to have a human “master”. He is then convinced by Nutmeg, a female ex-show dog, to help the boy out of obligation. The pack seeks advice from sage-like dogs Jupiter and Oracle, that surmise that Spots might be held captive by an isolated tribe of dogs rumored to be cannibals.
Meanwhile, Watanabe finally develops a successful serum and shows the results to Kobayashi, who dismisses the results and refuses to lift the dog ban. The professor objects, only to be put under house arrest and killed by a piece of poisoned sushi by orders of the mayor’s hatchet man, Major Domo. Tracy Walker, an American exchange student and member of a pro-dog activist group, suspects a conspiracy and begins to investigate. Mayor Kobayashi and his political party are revealed to be actually responsible for the dog flu outbreak, seeking to eliminate the dogs as Kobayashi’s cat-loving ancestors tried to do 1,000 years ago, who were foiled by a legendary samurai boy who closely resembled Atari.
During their journey, Chief and Atari are separated from the others. Atari gives Chief a bath, revealing his white and black-spotted coat, and that he bears a striking resemblance to Spots. The two finally begin to bond and rejoin the rest of the pack, but are ambushed by another rescue team. Spots then arrives with the dog tribe and they help Atari’s group to escape. Spots confirms that he is Chief’s older brother and that he was rescued by the dog tribe, which are former test subjects from a secret lab that was abandoned after a tsunami. Spots became their leader and mated with a female tribe member named Peppermint, which is pregnant with their first litter. Because of these circumstances, Spots requests for Atari to transfer his protection duties to Chief; both Atari and Chief accept. An owl later brings word that Kobayashi has rounded up all the exiled dogs and plans to exterminate them with poison gas.
Tracy confronts Watanabe’s closest colleague Yoko Ono, who confirms Tracy’s conspiracy theories and gives her the last vial of the serum. At his re-election ceremony, Mayor Kobayashi prepares to give the extermination order, when Tracy presents her evidence of his corruption. Kobayashi then revokes her transfer license, meaning that Tracy would no longer be allowed to study as a transfer student, and that she would depart on a flight back to her hometown of Cincinnati, Ohio. Atari and the dogs soon arrive, and confirm the serum works by testing it on Chief and curing him. Atari addresses the crowd and recites a haiku he wrote and dedicated to Kobayashi, rekindling the sympathy that once existed between dogs and humans, pushing the audience to tears. Touched by Atari’s words, the defeated and shameful Kobayashi openly confesses to his corruption in front of everyone and officially rescinds the Trash Island decree. Enraged, Major Domo has a robot dog attack Kobayashi; Spots destroys it with one of his military-issued explosive teeth, but Atari and he are gravely injured in the process. Domo then presses the button to trigger the extermination, completely uncaring that it would also result in the countless deaths of the Megasaki citizens who are now in the way, only to have the extermination equipment and robots to malfunction and fail due to sabotage from Tracy’s activist group. Atari and Spots are taken to a hospital, where Kobayashi donates one of his kidneys to save his nephew.
One month later, Atari becomes the new mayor of Megasaki due to a legal statute in Kobayashi’s stead, and has all dogs reintegrated into society and cured of the dog flu, while Kobayashi and his co-conspirators and propagandists are all jailed for political corruption, and Major Domo faces a possible death sentence under Megasaki’s new laws. Tracy (whose license was reinstated) and Atari become a couple, while Chief becomes Atari’s new bodyguard dog and starts a relationship with Nutmeg. Meanwhile, Spots (recovering from his injuries) has had a statue erected in his honor, and resumes raising his litter with Peppermint under the care of a monk at a Shinto temple.