Two 14-year-old boys in the DeWitt, Arkansas area, Ellis (Tye Sheridan) and Neckbone (Jacob Lofland), have found a boat stuck high in a tree on a small island in the Mississippi River. They want to claim it for themselves but discover someone is living in it. They meet him, a strange man named Mud (Matthew McConaughey), who claims to have grown up nearby. He tells the boys that he needs food and promises to give them the boat if they help him while he stays on the island.
The boys return with food and ask Mud why he is hiding out; he says he is waiting for his old girlfriend, Juniper (Reese Witherspoon), whom he describes as beautiful with bird tattoos on her hands. They later spot her grocery shopping in town. Ellis falls for an older high-school girl named May Pearl.
Ellis learns from his father that his parents are heading for divorce. This threatens their old river houseboat. Once no longer used as a residence by the owner, it will be removed.
Later, Ellis and his mother (Sarah Paulson) are stopped at a police roadblock. He then learns that Mud is a fugitive and tells the police that he has not seen that man. Ellis and Neckbone rush back to Mud and ask why the police are hunting him. Mud explains that he killed a man who had gotten Juniper pregnant and pushed her down a flight of stairs, causing her to lose the child. The boys decide to help Mud in exchange for his pistol.
Mud sends Ellis to Tom Blankenship (Sam Shepard), an older father figure from his childhood, for help. Tom lives across the river from Ellis and agrees to come talk to Mud but is disturbed to hear that Mud is in trouble over Juniper again and refuses to help.
After his plea for help is rejected by Tom, Mud gives the boys a note for Juniper. They find her motel room where another man (the brother of the man Mud killed) is abusing her. Ellis charges at the man but is quickly overpowered. Neckbone and Ellis tell Mud about the man. Mud realizes that the family of the man he killed has arrived to kill him.
King Carver (Joe Don Baker), the father of the man Mud murdered, and his surviving son (Paul Sparks) with a handful of bounty hunters talk about staking out Juniper’s motel and have paid off the local and state police.
Stealing machine parts and an outboard motor from junkyards, the boys help Mud repair the boat. They develop a plan to reunite Juniper with Mud, but after agreeing to meet the boys at her hotel to bring her to him, she doesn’t show and instead heads to a bar and flirts with other men. Ellis and Neckbone tell Mud about it and that Juniper didn’t want to come.
Ellis brings a note from Mud to Juniper, telling her it’s over between them. Although she says she understands, Juniper tells Ellis that Mud is a born liar and she’s sick of running away with him. Ellis is dejected, not only because he thought he was helping a couple in love, but furthered by May Pearl’s rejection of him in front of her friends and not returning his phone calls.
Upon returning to the island, Ellis angrily calls Mud a liar, says he used the boys to do what he was afraid to do, and turned them into thieves. Running away, Ellis falls into a pit containing water moccasins and is bitten. Mud jumps in and rescues Ellis. Mud races to get the unconscious Ellis to hospital on the mainland. Recognizing Mud as the wanted man, one of the hospital employees calls the police who, in turn, tip off Carver.
Mud manages to get back to the island where he and Neckbone get the repaired boat into the water. As they agreed before, Mud gives Neckbone a Colt .45 semi-automatic pistol but without ammunition. Mud wants to say good-bye to Ellis, so Neckbone takes him to the houseboat where he is recovering. While Mud is in Ellis’ room, the Carver son and his posse arrive and start shooting. Tom fires his old sniper rifle, killing several attackers from across the river. Mud saves Ellis and tries to get away but is shot as he dives into the river. The police arrive and find all the posse members dead. One trooper calls King to tell him that his other son is now dead.
Ellis’s parents separate. He and his mother move to an apartment in town and their houseboat is demolished, while his father gets a new job far away, before telling Ellis to take care of his mother and departing. Ellis sees some attractive older teenage girls there and smiles. He is uncertain of Mud’s fate, but still believes he was protecting Juniper.
Mud is revealed to be alive and recovering on the repaired boat driven by Tom. Many days have passed, and the film ends with them looking ahead at the mouth of the Mississippi River, and south of that, the Gulf of Mexico.