John Chisum, a virtuous, patriarchal land baron, locks horns with greedy Lawrence Murphy, who will stop at nothing to get control of the trade and even the law in Lincoln County, New Mexico Territory.
Chisum is an aging rancher with an eventful past and a paternalistic nature towards his companions and community. Murphy, a malevolent land developer, plans to take control of the county for his own personal gain.
The story begins with Murphy’s men tipping off Mexican rustlers who plan to steal Chisum’s horses. Chisum and his sidekick James Pepper stop the bandits with help from a newcomer to the area, William H. Bonney, also known as “Billy the Kid”. A notorious killer, Billy has been given a chance to reform by Chisum’s philanthropic British neighbor, rancher Henry Tunstall. Billy also falls for Chisum’s newly arrived niece, Sallie.
Murphy is buying up all the stores in town and using his monopoly to push up the prices. He appoints his own county sheriff and deputies. He also brings in a lawyer, Alexander McSween, whose principles lead him to switch sides and seek work with Chisum and Tunstall. The two ranchers set up their own bank and general store in town under McSween’s control.
Chisum’s land and cattle remain targets. Murphy’s men attempt to steal Chisum’s cattle before he can sell them to the United States Army. Chisum’s ranch hands are warned by Pat Garrett, a passing buffalo hunter. Garrett agrees to help Chisum and soon befriends Bonney. Together they foil an attack by Murphy’s men on the wagons bringing in provisions for the new store.
Fed up with Murphy’s underhanded activities, rancher Henry Tunstall rides off to Santa Fe to seek the intervention of Territorial Gov. Sam Axtell. On the way, he is intercepted by Murphy’s deputies, who falsely accuse him of cattle rustling and shoot him dead. Chisum and Garrett hunt down the deputies and bring them back to town for trial. Bonney, seeking revenge for the murder of his mentor and skeptical that the men will truly face justice in town, overpowers Garrett by surprise and shoots dead both deputies. Before corrupt Sheriff Brady can organize a posse, Billy rides into town and kills him, too.
Murphy appoints bounty hunter Dan Nodeen as the new sheriff, giving him orders to hunt down Bonney. Nodeen has a score to settle, as a previous encounter with Bonney has left him with a permanent limp.
Billy’s plans for revenge are only just beginning. He breaks into McSween’s store looking for dynamite to rob Murphy’s bank. He is spotted by Nodeen, who surrounds the store with Murphys’s men. McSween’s wife is allowed to leave. McSween later comes out unarmed but Nodeen shoots him in cold blood.
Chisum is alerted by McSween’s wife Sue, and rides into town with his ranch hands. The main street is blocked, so Chisum stampedes his cattle through the barricades. He tracks down Murphy and takes him on in a fist fight which ends with both men falling from a balcony. Murphy ends up impaled on steer horns. With his paymaster dead, Nodeen flees, with Billy in pursuit.
The film ends with Garrett taking over as sheriff. It is learned that famous U.S. Army General Lew Wallace has become governor of the territory. With law and order restored, Chisum can resume his iconic vigil over the Pecos valley.